Kinanti Ranum Falina, Retno Yuni Nur Susilowati

The Effect of Corporate Social Responsibility (CSR) Disclosure and Political Connection on Corporate Tax Avoidance

Introduction

The effect of corporate social responsibility (csr) disclosure and political connection on corporate tax avoidance. Explores CSR disclosure, political connection, and tax avoidance in Indonesian mining companies (2020-2024). Finds no significant effect, providing insights for policymakers and investors.

Abstract

This study investigates the effect of Corporate Social Responsibility (CSR) disclosure and political connection on corporate tax avoidance among mining companies listed on the Indonesia Stock Exchange (IDX) during the period 2020–2024. As CSR practices increasingly shape stakeholder expectations, questions arise as to whether such disclosures genuinely reflect ethical corporate behavior or are strategically employed to legitimize tax planning. In addition to CSR disclosure, political connection is examined as an external institutional factor that may influence firms’ tax behavior by reducing regulatory scrutiny and enforcement risk. CSR disclosure is measured using the Global Reporting Initiative (GRI) index, while tax avoidance is proxied by the Effective Tax Rate (ETR). Additionally, political connection is identified based on the presence of politically affiliated individuals in the firms’ board list. This study adopts a quantitative approach employing panel data linear regression analysis. The research population consists of mining companies consistently listed on the IDX during the observation period, with samples selected through purposive sampling, having 41 mining companies in total. This study aiming to contribute to academic discourse and practical implications for policymakers, investors, and regulators. The findings found that there are no significant effect between CSR disclosure and political connection on tax avoidance. The results of this study concluded that there are many factors both from internal and external that could affect tax avoidance activity in Indonesia’s mining companies yet was not covered in this study.

Review

This study addresses a highly pertinent and complex issue at the intersection of corporate governance, ethics, and public finance: the relationship between Corporate Social Responsibility (CSR) disclosure, political connection, and corporate tax avoidance. Focusing on Indonesian mining companies provides a valuable contextual lens, given the industry's significant environmental and social impact, and Indonesia's unique regulatory and political landscape. The methodology is clearly outlined, employing established measures like the Global Reporting Initiative (GRI) index for CSR disclosure and Effective Tax Rate (ETR) for tax avoidance, along with a practical approach to identify political connections. The use of panel data linear regression is an appropriate quantitative method for analyzing corporate behavior over time, making the research question itself, probing whether CSR disclosures are genuinely ethical or strategically legitimizing, intellectually stimulating and directly relevant to current academic discourse and stakeholder concerns. A primary concern arises from the study's principal finding: the absence of a significant effect for both CSR disclosure and political connection on tax avoidance. While non-significant results are valid scientific outcomes, the abstract's concluding remark that "many factors both from internal and external...yet was not covered in this study" suggests a potential limitation in the initial theoretical framing or model specification. This statement, rather than offering deeper insight into *why* the expected effects were not observed (e.g., due to specific Indonesian institutional characteristics, the nature of mining operations, or potential moderating variables), appears somewhat post-hoc. Furthermore, while the measurement of political connection via board members is common, it might not fully capture the nuanced and often covert forms of political influence that could impact tax behavior, potentially understating its effect. The abstract could have benefited from a more explicit discussion of control variables included in the model, or a pre-emptive acknowledgment of potential omitted variables, to strengthen the interpretation of the null findings. Despite the non-significant findings, this study makes a valuable contribution by challenging established assumptions and highlighting the complexity of these relationships within a specific emerging market context. The results prompt further inquiry into the contextual factors that might attenuate or modify the expected impacts of CSR and political ties on tax avoidance. For policymakers and regulators, the study implies that current levels of CSR disclosure or the presence of political connections, as measured, may not be direct indicators or drivers of tax avoidance in Indonesian mining. Future research could explore mediating or moderating variables (e.g., firm size, ownership structure, industry-specific regulations, or the stringency of CSR reporting standards) that might interact with CSR disclosure and political connections. Additionally, employing alternative proxies for tax avoidance or political influence, or adopting qualitative methods to delve into the decision-making processes, could offer richer insights into the factors truly driving tax behavior in this critical sector.

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