Political Connection, Foreign Ownership, and Tax Avoidance: Does Executive Gender Moderate the Relationship?

Abstract

Tax revenue is a vital source of income to support the economic development of a country. Therefore, this study aims to provide empirical evidence of the influence of political connections and foreign ownership on tax avoidance. This study also analyzes the moderating role of executive gender on the influence of political connections and foreign ownership on tax avoidance. This study used secondary panel data from a survey conducted by the World Bank Open from 2006-2018. This study's data was around 50,454 companies from all over the world. The hypothesis testing was performed using multinomial logistic regression. The results showed that political connection positively affected tax avoidance, but foreign ownership had no significant effect on tax avoidance. Furthermore, male executives strengthened the relationship between political connections and tax avoidance, but it did not moderate the effect of foreign ownership on tax avoidance. The findings suggested that the Directorate General of Taxation should scrutinize companies with political connections to optimize government tax revenue.

Keywords

• political connection
• foreign ownership
• executive gender
• tax avoidance.