The Effect Of Capital Intensity, Sales Growth, Leverage On Tax Avoidance And Profitability As Moderators

Abstract

The purpose of this study was to examine the effect of capital intensity, sales growth, leverage on tax avoidance and profitability as a moderator. Tax Avoidance in this study was measured using the cash effective tax rate (CETR) approach and leverage was measured using the debt to equity ratio (DER). Profitability as a moderating variable is measured using return on assets (ROA). The research sample uses food and beverage sub-sector manufacturing companies listed on the Indonesia Stock Exchange. The research method used is a purposive sampling approach. The number of companies used in this study were 11 companies with a research period span of five years, so the number of samples used in this study was 55 samples. The model in this study uses multiple linear regression. The results of the study prove that the variables of capital intensity and sales growth have an effect on tax avoidance. On the other hand, leverage proxies with DER has no effect on tax avoidance. The results of this study can also prove that profitability is proxyed by return on assets to moderate the effect of leverage on tax avoidance. On the other hand, profitability as proxied by return on assets cannot moderate the effect of capital intensity and sales growth on tax avoidance.

Analysis of the Effect of Tax Compliance, Tax Avoidance, and Financial Reporting Quality on Company Financial Performance: A Case Study on a Manufacturing Company in Indonesia

“…Companies that comply with tax regulations not only avoid legal consequences, but also experience improved financial performance, which may be due to reduced legal risk and increased stakeholder trust. Tax compliance is positively associated with improved financial performance, potentially due to reduced legal risk and increased stakeholder trust [35], [40]. Companies that comply with tax regulations not only avoid legal consequences, but also experience better financial results [41].…”

“…Tax avoidance, characterized by legal strategies to minimize tax liabilities, has been found to have a positive impact on firm value [34]. It is believed that tax planning can benefit shareholders by increasing financial performance [35]. However, excessive tax avoidance can lead to reputational risk and increased government scrutiny, which can negatively affect a company's long-term financial viability [36].…”

The effect of tax avoidance on firm value with leverage as a moderating variable

“…http://dx.doi.org/10.21511/imfi.21 (2).2024. 27 Hanlon and Slemrod (2009) investigated market perceptions of tax aggressiveness, which can be viewed positively or negatively. If tax aggressiveness is perceived as tax efficiency and planning efforts, it is considered positive and can enhance company value.…”

The relationship between sales growth, profitability, and tax avoidance

“…Such findings are consistent with broader international research, emphasizing that the pursuit of aggressive tax avoidance can negatively impact firm performance. Sumantri et al (2022) examined the effect of capital intensity, sales growth, leverage on tax avoidance, and profitability as moderators. Tax avoidance was measured using the cash-effective tax rate (CETR) approach, and leverage was measured using the debt-to-equity ratio (DER).…”