Abstract
This research aims at finding the empirical proof of the firm’s size impact on
income tax, by considering CSR as mediating variable. This research is crucial to
conduct since Juli 2007 Indonesia became the first country to introduce
mandatory legal requirements for CSR when the Indonesia parliament passed
Law 40/2007. Based on this Law, CSR turns into the company’s expense.
Meanwhile, in taxation principles, the are types of expense which can be
reduced to minimize the company’s tax. Therefore, this research is directed to
answer if CSR is closely related to company’s tax planning.
The research samples were manufacture companies listed in Indonesia Stock
Exchange in 2011. The total numbers are 79 companies. This research employed
a model wherein independent variable (firm size) did not show direct connection
with dependent variable (income tax). The test of the hypothesis employed
regression and Sobel tests. The variable of firm’s size was proxied with the value
of market capitalization. CSR variable was measured based on the numbers of
report on company’s social and ecological responsibility which was in line with
economic performance indicator GRI 3.1. which was revealed in annual report
and/or sustainability report. The variable of the income tax was proxied by
CTTOR (Corporate Tax to Turn Over Ratio). This ratio was used to know the
unpayed income tax in one year relative to the sale performed by the company.
The result shows that (1) the firm’s size influences CSR disclosure; (2) CSR
disclosure influences the income tax; and (3) CSR disclosure is a mediating
variable in term of firm’s size to income tax. This means that CSR realization is
not independent from company’s tax planning. In other words, the realization of
CSR considers taxation principles related to deductible and nondeductible
expenses.