THE INFLUENCE OF BOARD OF DIRECTORS’ REMUNERATION ON TAX AVOIDANCE (A Case Study of Textile and Garment Companies Listed on the Indonesia Stock Exchange in 2021-2023)

Bernadinus Erwin¹, Mustika Winedar²

Abstract

This research examines the relationship between managerial compensation and corporate tax planning approaches within textile manufacturing firms traded on Indonesia’s capital market from 2021 through 2023. Management compensation functions as a key governance tool influencing executive choices, especially in tax strategy decisions. The research employs quantitative methodology utilizing secondary data sourced from corporate annual reports. Analytical procedures encompass multiple linear regression analysis incorporating classical assumption testing, t-statistics, F-statistics, and determination coefficient (R²) evaluation.

Research findings demonstrate that executive compensation exerts a statistically significant positive impact on corporate tax avoidance practices, indicating that elevated compensation levels correspond to increased propensity for tax avoidance behaviors. The t-test significance value registers 0.000, while the R² coefficient reaches 0.969, suggesting that 96.9% of tax avoidance variance can be attributed to executive compensation variables. These results provide crucial insights for corporations, regulatory bodies, and policy developers in establishing balanced incentive frameworks that discourage aggressive tax planning strategies