The impact of tax rate decreasing policy

Since 1995, Indonesian government tries to reform its tax, including tax rate. This
study tries to get the picture of earnings management incentive of tax payers during three
reform period. Earnings management is measured using discretionary accrual adopted from
modified Jones model. By comparing the magnitude of earnings management of companies
for year 1995, 2001, 2009 and 2010 we found that there is no differences between 2001,
2009 and 2010 periods. Only year 1995 the company earnings management decreases
significantly. This raise question of effectiveness of tax rate decreasing policy.