Impact of Company Characteristics, Liquidity, and Good Corporate Governance on Tax Aggression

This study aims to determine the impact of company characteristics, liquidity, and good corporate governance on tax aggressiveness. As secondary data, annual report information from companies included in the LQ45 index and listed on the IDX between 2016 and 2020 is utilized. The sample size was fourteen companies. The study used regression analysis of panel data as a methodology. The results indicated that the liquidity variables partially influenced tax aggressiveness, whereas the company's characteristics and good corporate governance did not. The test results suggest that if the liquidity level is low, it will reduce the level of creditor trust and result in a decrease in the level of capital loans by creditors; therefore, the company will maintain its liquidity level so as not to engage in tax avoidance .


INTRODUCTION
The largest source of state revenue is taxes.Taxes play an essential role in the economy, as tax contributions make up a more significant portion of the state budget (APBN) revenue post than other sources of revenue (non-tax) (Putra, 2019).Consequently, the government encourages businesses and individuals to pay taxes through various socialization.In reality, numerous companies and individuals still have not met their tax obligations.Many businesses and private individuals seek to minimize their tax payments through tax aggressiveness activities.If employed correctly, tax aggressiveness can provide substantial benefits, particularly for corporate taxpayers.Companies engage in aggressive taxation or tax avoidance in response to perceived opportunities, namely weak tax laws and regulations and *Corresponding author's e-mail: july.ismanto@gmail.comhttp://openjournal.unpam.ac.id/index.php/EAJinadequate human resources (Fiscus) (Putra & Merkusiwati, 2016).
Sri Mulyani Indrawati, Minister of Finance (Menkeu), stated in her report that the implementation of the 2021 State Budget was successful and exceeded the 2021 State Budget's target.Until December 31, 2021, state revenue was able to increase by IDR 2,003.1 trillion, or 114.9 per cent of the 2021 state budget target of IDR 1,743.6 trillion."Assuming this deviation, we see that our state budget has been realized very favourably, with state revenues reaching 2,003,1 trillion IDR as of December 31," stated the Minister of Finance at the Press Conference on the Realization of the 2021 State Budget on Monday (03/01) (Kemenkeu,2022).This accomplishment increased by 21.6% compared to the state budget of 1,647,8 trillion IDR for 2020.This year there will still be a pandemic with Delta and Omicron, but we can still grow at 21.6 per cent.The improved performance of the 2021 State Budget is a positive sign for the continuation of a more substantial economic recovery in 2022.The State Budget will continue to serve as a safeguard for public safety and a catalyst for economic recovery (Kemenkeu, 2022) Over the past five years, the performance of tax revenues has fluctuated.
Regarding the performance, the government explained.The government described in the document titled 2021 Macroeconomic Framework and Fiscal Policy Principles.From 2015 to 2019, the growth of tax revenues was 8.2%, 3.6%, 4.6%, 13.0%, and 1.8%, respectively."The volatile tax performance demonstrates that tax revenues are heavily influenced by domestic economic activity and international trade performance, (DDTNews, 2020).
Taxes are regarded as expenses that reduce a company's profits.This has prompted many businesses to make arrangements for taxes that must be paid to reduce the costs associated with taxation.According *Corresponding author's e-mail: july.ismanto@gmail.comhttp://openjournal.unpam.ac.id/index.php/EAJto Frank, Lynch, and Rego (2009) (A. A. Putri & Hanif, 2020;Susanto et al., 2018), corporate tax aggressiveness is the act of engineering taxable income through tax planning actions, either legally classified (tax avoidance) or illegally (tax evasion) (tax evasion).The greater the tax savings a company achieves, the more aggressive its tax strategy is deemed to be (Fadli et al., 2016).Tax aggression is regarded as an effective method for lowering tax obligations and increasing stakeholders' wealth.Leverage is another financial condition that is anticipated to influence the aggressiveness of corporate taxes.Leverage is the capacity of a company to use debt to meet its operational and investment requirements.Leverage indicates how much of a company's assets are financed by debt.According to (Suyanto & Supramono, 2012), companies with a high tax burden can use debt to generate tax savings.This is because the use of debt incurs a fixed cost in the form of interest that can be deducted when computing income tax.The increasing use of debt will result in a rise in interest expenses, reducing profits while reducing the tax burden.
According to prior research, the decision to engage in tax aggressiveness results from direct corporate policies.The individuals involved in making tax decisions are tax directors and corporate tax consultants, whereas executives (president directors or president directors) with different characteristics also directly or indirectly influence all company decisions, so executive characteristics are regarded as significant factors that can affect the executive's policies (Boussaidi & Hamed-Sidhom, 2021;Desai & Dharmapala, 2007;Irmawati et al., 2020).
Research by Putri & Putra, (2017) develop evidence of institutional ownership factors in increasing the effectiveness of monitoring management performance.Fom research that has been carried out by Yanuarsa et al., (2021) that was inspired by a previous study (Dewi & Noviari, 2017;Fadli et al., 2016;A. A. Putri & Hanif, 2020;Selvirani & Nofryanti, 2021;Wijayanti, 2017) about the phenomenon of Tax Aggressiveness associated with financial conditions.This study aims to retest the consistency of the results with previous studies in different periods and capital market requirements.

Problem Definition
Whether the company's characteristics, its level of Liquidity, and corporate governance have an impact on tax aggressiveness

Agency Theory
Agency theory explains the relationship between principals and agents.In tax avoidance, the principal is the party that gives authority to the agent, namely the government.In contrast, the agent is a party *Corresponding author's e-mail: july.ismanto@gmail.comhttp://openjournal.unpam.ac.id/index.php/EAJauthorized by the principal, namely the taxpayer/company (Yuliana and Wahyudi, (2018); Yudhistira & Anggraeni, (2022).The government allows companies to perform their tax calculations, but frequently the companies do not fulfil their responsibilities.Companies often engage in practices that reduce the tax burden that must be paid, such as increasing or decreasing income, so that the tax burden paid is less than it should be (Yudhistira & Anggraeni, 2022).
The employment contract relations between the agent and principal permit the agent to decide when the agent and principal are utility maxims (Abd-Elmageed et al., 2020).This agency theory has multiple goals, including enhancing the agent's and principal's ability to evaluate the surrounding environment to determine the decisions that must be made and assessing the results of decisions made to facilitate the allocation of results between the agent and the principal following the employment contract (Astuti, 2021).

Legitimacy Theory
Understand the theory of legitimacy proposed by (Deegan et al., 2002), which states that an organization must continually assess whether it has operated following societal norms and ensure that its activities are acceptable to outsiders (legitimized).
According to Chariri and Ghozali (2007) (Dewi & Noviari, 2017;Suranta et al., 2020), the underlying theory of legitimacy is the social contract between the company and the society in which it operates and uses resources.This theory is founded on the premise that businesses must benefit the community.This can be accomplished by implementing tax payments following applicable laws and regulations.With the benefits provided to the public, the company can receive legitimacy-based feedback from the crowd.
The elimination of corporate tax is viewed as fulfilling a company's social responsibility to the community in which it operates (Preuss, 2010).If there is a conflict between the enterprise's value system and the society's value system, the theory of legitimacy relating to social performance and financial performance is invalid (often called the legitimacy gap).Tax evasion is a crime against the state rather than against the director-general of taxes.In this perspective, the legitimacy theory is more pertinent when viewed through corporate compliance and tax avoidance (Suranta et al., 2020).

Organizational Characteristics
Numerous factors distinguish one company from another, even if they are in the same business line, influencing each company's social impact.The factors that determine such companies are known as the company's characteristics, and leverage is one of them.Leverage is a source of external funding for companies, particularly in long-term debt.The interest expenses generated from these debts will reduce company profits and tax burdens over the long term (Aisyah & Habibah, 2021).*Corresponding author's e-mail: july.ismanto@gmail.comhttp://openjournal.unpam.ac.id/index.php/EAJThis is because leverage measures a company's dependence on its creditors to finance its assets.Leverage is the use of assets and sources of funds by companies with fixed expenses, precisely the source of funds derived from loans because interest is a fixed expense, to increase potential profits (Yuliana & Wahyudi, 2018).

Liquidity
A company with a high liquidity ratio can meet its short-term obligations, indicating that it is in good financial health and can quickly sell its assets if necessary (Sugiono & Untung, 2016).The company's Liquidity positively affects the level of corporate tax aggressiveness.This assertion is supported by researchers Fadli et al., (2016), who demonstrate that partially liquid variables substantially impact tax aggressiveness.Nonetheless, the results of some researchers' studies contradict the theory that there is a positive relationship between Liquidity and tax aggressiveness.Research conducted by (Siahaan, 2005) indicates that companies with liquidity issues are unlikely to comply with tax regulations and are more likely to engage in tax avoidance to maintain cash flow.Consequently, firms with a low liquidity ratio will have a high corporate tax aggressiveness.

Corporate Governance
Another definition of GCG is a sound system and structure for managing the company to increase shareholder value and accommodating various parties interested in the company (stakeholders), including creditors, suppliers, business associations, consumers, workers, government, and other communities (Avianita & Fitria, 2020).
Institutional ownership distinguishes decision-making processes.Institutional ownership is the proportion of all outstanding shares owned by institutional investors, as measured by the percentage of shares held by institutions, (Fadli et al., 2016).Institutional ownership is the primary measure in corporate governance that mediates the existence of tax avoidance in corporations, which affects the company's value.Tax avoidance will benefit from the reality of control and a high level of supervision of institutional ownership (Fadli et al., 2016;Desai & Dharmapala, 2009).

Data Collection Techniques
The secondary data used in this study are utilized in this investigation.According to the findings of this study, all LQ45 companies were listed on the Indonesia Stock Exchange between 2016 and 2020.This study employed a method of sampling known as purposive sampling.Purposive sampling is a technique for collecting samples based on the researcher's predetermined criteria.This study employs quantitative data from LQ45 companies listed on the Indonesia Stock Exchange as its secondary data source (IDX).Secondary data is information gathered from sources other than the company being studied.The information utilized is the annual report information from 2016 to 2020.This study drew its lead from the www.IDX.co.id website.(Aini, 2015).This study utilized several company characteristics, including *Corresponding author's e-mail: july.ismanto@gmail.comhttp://openjournal.unpam.ac.id/index.php/EAJleverage (Gunawan & Kris Resitarini, 2019; Putri & Hanif, 2020).

Lev =
Long − Term Debt Total Assets

Company Liquidity
Liquidity is calculated using the current ratio because it measures the company's short-term ability by comparing its current assets to its current debt (in this case, debt is the company's obligation, which includes tax debt) (Masyitah & Kahar, 2018).

𝐶𝑅 = 𝐶𝑢𝑟𝑟𝑒𝑛𝑡 𝐴𝑠𝑠𝑒𝑡 𝐶𝑢𝑟𝑟𝑒𝑛𝑡 𝐿𝑖𝑎𝑏𝑖𝑙𝑖𝑡𝑖𝑒𝑠
Current Ratio: CR Current Assets: The total amount of a business's current assets.Current Liabilities: The company's current debt and liabilities.

Good Corporate Governance (GCG)
Good Based on these data, the selection of companies to be used as samples was conducted, and 14 companies were subsequently obtained.This study employs a causal approach, which tests the causal relationship between independent and dependent variables.In the employed regression analysis method, the following equation is used: *Corresponding author's e-mail: july.ismanto@gmail.

Descriptive Statistical Analysis
Descriptive statistics provide a description or descriptive data that can be seen from the average value (mean), standard deviation, maximum, and minimum.For this reason, a statistical description of the results of descriptive statistical tests using Eviews version 9.0 for windows will be presented in the following table:

Table 2. Descriptive Statistic
Data source: process data 2022

Chow Test
Chow test is used to test the regression model to be chosen between the common effect and fixed effect model.The choice between these two methods is based on the probability cross-section F value generated.If the probability crosssection F value is > 0.05, then H0 is accepted, meaning that the common effect model is used.If the probability cross-section F is <0.05, then H0 is rejected, meaning that the fixed effect model is used (Winarno, 2017).The results of the Chow test output in table 3 above, the probability value of cross-section F is 0.0000, and the probability value of cross-section Chi-square is also 0.0000.This shows the result that the probability value is less than 0.05, so in this chow test, the best model is the Fixed Effect, so the next estimation model is the Hausman test.

Hausman Test
The Hausman test was conducted to determine which regression model should be used in research between the fixed effect model and the random effect model.The choice between these two methods is based on the resulting Chisquare probability value.If the probability value of Chi-square > 0.05, then H0 is accepted, meaning that the method used is a random effect model.If the probability value of Chi-square < 0.05, then H0 is rejected, meaning that the method used is a fixed effect model.

Table 4. Hausman Test
Data source: process data 2022 Hausman test output results are shown in table 4, the probability value of the Chi-square generated is 0.0295.The results show the probability of Chi-square < 0.05, meaning that H0 is rejected, and the fixed effect model is used.
The conclusion is the same in the two tests above, namely the Chow test and the Hausman test.The model used is the fixed effect model.The output results above can be seen that there is no heteroscedasticity problem.This is because the results obtained in the form of a Chi-Square probability value of 0.2410 where the Chi-Square probability value is greater than the significance level of 0.05 (0.2410 > 0.05) so it can be concluded that the data used is free from heteroscedasticity symptoms.and homoscedasticity.Output correlation between Leverage, Liquidity and Institutional Ownership is below the correlation coefficient of 0.80.An indication of the occurrence of multicollinearity is if the correlation coefficient between each independent variable is greater than 0.80, then if viewed from the study's results above, there is no correlation between the independent variables that are high above 0.80.so that in this study, there is no multicollinearity between the independent variables.Based on the formed regression model with the Fixed Effect Model in table 7, the following results can be explained that the value of a constant of -0.134208 shows that if the independent variables (company characteristics, company liquidity level, and corporate governance) are considered constant, then the value of ETR is -0.134208 means that it has a prediction of negative tax aggressiveness, or in other words, the company can get out of the situation of committing tax aggressiveness and or it can be said that it does not carry out tax aggressiveness.

Panel Data Regression Analysis
The characteristic regression coefficient of the company annotated with X1 leverage proxies is 0.056682.The meaning of the value of 0.056682 is that for every 100% increase in the characteristic variables of the company, the aggressiveness of taxes carried out by the company will increase by 5.6%, assuming that other independent variables in the model are considered constant.
The regression coefficient of the company's liquidity level annotated with X2 is 0.208947.The meaning of the value of 0.208947 is that for every 100% increase in the variable level of Liquidity of the company, the aggressiveness of the tax carried out by the company will increase by 20.89%, assuming other independent variables in the model are considered constant.
The regression coefficient of corporate governance annotated with institutional ownership proxies X3 is 0.062075.The meaning of the value of 0.062075 is that for every 100% increase in the variable measure of corporate governance, the aggressiveness of taxes carried out by the company will increase by 6.21%, assuming that other independent variables in the model are considered constant.
Epsilon (error term) or e means that some other factors or variables affect tax aggressiveness in addition to the company's characteristics, the level of company liquidity, and corporate governance.

Coefficient' of Determination (R 2 )
Based on the regression model with the Fixed Effect Model in table *Corresponding author's e-mail: july.ismanto@gmail.comhttp://openjournal.unpam.ac.id/index.php/EAJ7, the Adjusted R square value of 0.870536 indicates that accounting conservatism and tax avoidance influence the company's value by 87.05 per cent.In comparison, the remaining 12.95 per cent is influenced by other variables that have not been examined in this study.
Influence of the company's characteristics on tax aggressiveness.
The test results using panel data regression in table 7 show that the company's characteristics are proxied by the leverage coefficient value of 0.056682 with a significance of 0.4257.Because the significance is greater than 0.05, the first hypothesis states that leverage has no significant effect on tax aggressiveness.
The results of this study support the research conducted by (Gunawan & Kris Resitarini, 2019;Yuliana & Wahyudi, 2018), which found no leverage effect on tax aggressiveness.On the contrary, the results of the study (Fadli et al., 2016;Putri & Hanif, 2020;Rohmansyah & Fitriana, 2020), shows that there is an effect of leverage on tax aggressiveness.The results of this test are also reinforced by observations (Sabna & Wulandari, 2021) stating that Leverage can be used as a benchmark for how much a company depends on debt (creditors) in financing company assets.The greater the level of debt the company makes will not affect tax aggressiveness.
This study also supports the theory that Leverage can be used as a measure of how much the company depends on creditors to finance the company's assets.Legitimacy theory also asserts that companies continually strive to ensure that they operate within the framework and norms that exist in society.They work and pay attention to the environment in which the company is located, where it seeks to ensure that outsiders accept its activities as legitimate (Deegan et al., 2002).
Indicate that a company with a high level of leverage means company can finance its assets with the capital it has.A company's leverage level can be used as an illustration of the company's financial risk.The company can be said to be independent and able to optimize the company's performance and not depend on debt.Companies that have too much debt will reduce investor confidence.So the company must maintain its profits because it is related to the interests of creditors.

The impact of the enterprise's Liquidity on its tax aggressiveness.
The second hypothesis states that the level of corporate liquidity affects tax aggressiveness.Table 7 shows the regression coefficient value of 0.208947 with a significance of 0.0051 because the significance is smaller than 0.05, the second hypothesis which states that the level of corporate liquidity has an influence on tax aggressiveness.
The results of this study support research conducted by (Rohmansyah & Fitriana, 2020;Stiawan & Sanulika, 2020), which found that corporate liquidity affects tax aggressiveness.The test results are reinforced by research (Stiawan & Sanulika, 2020), *Corresponding author's e-mail: july.ismanto@gmail.comhttp://openjournal.unpam.ac.id/index.php/EAJstating that "liquidity is the company's ability to generate cash in the short term to meet its obligations and depend on cash flows in the short term for its current assets and liabilities.
Theoretically, the results of this study support agency theory.Based on agency theory, the company's relationship with third parties (creditors) will make the company maintain its profits to maintain the stability of the company's performance.This is done in order to maintain good relations with third parties and to trust the company again to cooperate in the future.Debt companies tend to be less tax aggressive.Indications that the company has a high level of liquidity indicate the company's ability to meet the shortterm debt.This shows that the company's finances are in a healthy condition and have no cash flow problems, so they can bear the costs that arise, such as taxes.If the liquidity is low, it will reduce the level of creditors' trust and decrease the level of capital borrowing by creditors.The company will maintain its liquidity level so as not to cause tax avoidance behaviour.

The effect of corporate governance on tax aggressiveness.
The third hypothesis states that corporate governance proxied by institutional ownership affects tax aggressiveness.Table 7 shows the regression coefficient value of 0.062075 with a significance of 0.7070 because the significance is more significant than 0.05; the third hypothesis states that corporate governance as a proxy for institutional ownership has no significant effect on tax aggressiveness.The results of this study support the research conducted by (Fadli et al., 2016;Midiastuty et al., 2016;Susanto et al., 2018) Theoretically, the results of this study support agency theory, ownership by institutional investors does not necessarily provide control to management to take tax aggressive actions.The controlling shareholder can influence the company's management policies, forcing the manager to reduce the company's tax costs.This could be because institutional ownership gives trust in the supervision and management of the company to the board of commissioners, so the presence or absence of institutional ownership can still carry out tax aggressiveness actions.Ownership structures can also be used to reduce agency conflicts.
Here we can see that if institutional ownership does not affect tax effectiveness because of a good and influential role in monitoring the company, the risk of tax aggressiveness is detrimental to the company.
Indicate institutional ownership to encourage increased effectiveness of management performance monitoring.Institutional investors are shareholders in the form of institutions, such as insurance companies, banks or other *Corresponding author's e-mail: july.ismanto@gmail.comhttp://openjournal.unpam.ac.id/index.php/EAJinstitutions.Concentrated share ownership by institutional investors will optimize the effectiveness of monitoring management activities because of their large number of funds.Controlling ownership is not a factor that encourages company management to carry out tax aggressiveness.

CONCLUSION
Conclusion Based on the research results and discussion on the company's characteristics, the level of company liquidity, and corporate governance on tax aggressiveness in companies included in the LQ45 Index listed on the IDX during the 2016-2020 period.The following conclusions can be drawn (1) The characteristics of companies as proxied by leverage have no significant effect on tax aggressiveness with a positive coefficient direction on companies included in the LQ45 Index listed on the IDX during the 2016-2020 period; (2) The level of company liquidity significantly affects tax aggressiveness with a positive coefficient direction for companies included in the LQ45 Index listed on the IDX during the 2016-2020 period; (3) Corporate governance as proxied by institutional ownership affects tax aggressiveness with a positive coefficient direction for companies included in the LQ45 Index listed on the IDX during the 2016-2020 period.

Limitations
The selection of research objects only uses companies included in the LQ45 Index listed on the IDX during the 2016-2020 period, so the sample of companies used is small.In addition, the research period is only five years, so the research results do not reflect the actual phenomenon.
Suggestions For Further Research For the development of further research, it is suggested to include other variables that theoretically can influence tax aggressiveness, such as adding other financial ratio variables such as profitability ratios, and firm size, capital intensity, inventory intensity.In addition, further research can also add Corporate Social Responsibility (CSR) variables.The use of other types of industry can also be done to obtain a comparison between each different type of industry.Using longer years of observation.

Table 6 . Multicollinearity Test Result Data
source: process data 2022