Dielanova Wynni Yuanita, Christine Novita Dewi, Arief Zuliyanto Susilo, Kusharyanti Kusharyanti
This study investigates the differences in multinational and national firms’ tax avoidance. Furthermore, it investigates the differences between firms’ contingent behaviour, because of a country’s legal system and level of protection for investors. This research takes into account the phenomenon of firms’ tax avoidance. Besides that, it proposes novelties as follows. First, this study highlights that multinational firms tend to avoid taxes more than national ones do. Second, it induces the dividend catering theory related to a country’s level of investor protection. Lastly, it argues that a country’s level of investor protection, and legal system, make firms contingent on their tax avoidance behaviour. This study finds that firms operating in countries with high levels of investor protection and a common law system avoided paying tax more often than firms did in different countries. The findings imply that these firms could grow larger than others. It means that this study suggests there could be economic consequences. One consequence is that countries should increase their levels of investor protection and somehow redefine their legal systems. Therefore, they could enhance their capital markets and subsequently improve their nations’ welfare. © 2020, Gadjah Mada University. All rights reserved.
University of Gadjah Mada, Indonesia; Duta Wacana Christian University, Indonesia; Yogyakarta State University, Indonesia; UPN Veteran Yogyakarta, Indonesia
