Practice Management Analysis of Profit before and after Application of Income Tax Law No. 36 Of 2008

Abstract

This study aims to analyze whether the companies listed on the Stock Exchange conduct earnings management before and after the enactment of corporate income tax in 2008 in response to a change in corporate income tax rates into a single tax rate of 28% in 2009 and 25% in 2010. The sample was 62 companies listed in Indonesia Stock Exchange, which has published its financial statements from the years 2007-2010. The method of analysis in this study using descriptive statistics and statistical t test was used to test the value of discretionary accruals before and after reduction in the corporate income tax rate in 2008.

The results of the study prior to the enactment of corporate income tax in 2008 (2007 and 2008) show that discretionary accruals significantly negative, meaning there is an indication of income decreasing earnings management. The test results provide empirical evidence that the company lowered earnings in the year prior to the effective Income Tax Act 2008, to conduct earnings management with the goal of minimizing the tax burden. The results of the study after the enactment of corporate income tax in 2008 (2009 and 2010) show that discretionary accruals significantly negative, meaning no proven indications income increasing earnings management. The test results provide empirical evidence that the company did not raise earnings in the year after the enactment of corporate income tax in 2008 (2009 and 2010) to perform earnings management by transferring profits to which the corporate income tax rate effective in 2008 with the aim to benefit from a tax reduction.

Keywords: discretionary accrual, earning management, corporate income tax in 2008, income decreasing earning management, income increasing earning management.