International Journal of Economics.
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COMPANIES IN INDONESIA
Alya Nur Fadhilah1.
Ani Kusbandiyah2.
Azmi Fitriati3.
Hadi Pramono4 Muhammadiyah University of Purwokerto1,2 E-mail: alyanurfadhilah66@gmail.
com1, annykusbandiyah@gmail.
com2, azmifitriati.
ump@gmail.
75@gmail.
Abstract:
This study aims to provide empirical evidence on the influence of leverage, firm size, and profitability on tax avoidance, measured by the Effective Tax Rate (ETR).
Tax avoidance can benefit firms by reducing tax expenses but may also create agency conflicts between managers .
and shareholders .
regarding tax risks and compliance.
This research focuses on energy sector companies listed on the Indonesia Stock Exchange (IDX) from 2019 to 2023.
The sample was selected using the purposive sampling method, resulting in 102 observational data points.
The analysis was conducted through classical assumption tests, including normality, multicollinearity, heteroscedasticity, and autocorrelation tests, followed by multiple linear regression analysis using SPSS 26 to examine the relationships among variables.
The results indicate that firm size and profitability do not significantly affect tax avoidance, whereas leverage has a negative effect, suggesting that companies with higher leverage tend to engage in less tax avoidance.
These findings contribute to a deeper understanding of tax avoidance dynamics within the agency theory framework and provide insights for stakeholders in designing more effective tax policies.
Keyword:
Leverage, firm size, profitability and tax avoidance Submitted: 2025-01-17.
Revised: 2025-03-20.
Accepted: 2025-03-23 Introduction Tax is one of the sources of state revenue that contributes greatly to the state's financial posture.
The realization of tax revenue in 2023 reached 80% of total state revenue (Central Bureau of Statistics, 2.
Tax is the main pillar of the country's economy which plays an important role in supporting the sustainability of national development, including in the fields of defense, security, and public welfare.
(Ministry of Finance of the Republic of Indonesia, 2.
In an effort to optimize revenue from the tax sector, the state faces challenges, one of which is tax avoidance.
This practice can hinder national development (Ministry of Finance, 2022.
Tax avoidance is a tax planning strategy to reduce the tax burden by exploiting regulatory loopholes without breaking the law (Dhaniswara, 2.
Typically, this strategy involves complex corporate structures, licensing agreements to shift profits, and unbalanced debt arrangements, which allow profits to be shifted to areas with low tax rates (Fauzi et al.
, 2.
One indicator that reflects how effective a country is in collecting taxes is the tax ratio, which is the comparison between tax revenue and gross domestic product (GDP).
(Purnomo.
The following is a graph of the development of the tax ratio in Indonesia in the last ten International Journal of Economics.
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( D A L A M %)
2014 2015 2016 2017 2018 2019 2020 2021 2022 2023
Chart 1.
Tax Ratio Indonesia 2014-2023 Source: Macroeconomic Framework and Main Points of Fiscal Policy 2025 Data shows that Indonesia's tax ratio has fluctuated over the past ten years, reflecting the government's challenges in increasing tax revenue.
One of these challenges is tax avoidance, where companies minimize their tax obligations without violating the law.
This practice potentially reduces state tax revenue, especially from the energy sector, which contributes significantly to Corporate Income Tax.
Fluctuations in key commodity prices, such as oil and gas, crude palm oil, and minerals, can also influence corporate tax management strategies (Ministry of Finance of the Republic of Indonesia, 2.
A decline in commodity prices, as seen in 2023, led to a decrease in tax revenue from the oil and gas sector (Ministry of Finance of the Republic of Indonesia, 2.
Under such conditions, companies tend to optimize tax planning to maintain financial stability.
Several factors that can cause tax avoidance in companies are leverage, company size, and In the research of Afrianti et al.
Kurnia & Wagisuwari .
, and Putu et al.
shows that the variables of leverage, company size, and profitability each have a positive influence on tax avoidance.
In contrast to the results of the analysis of Nilasari & Arisyahidin .
Wulansari & Nugroho .
, and Nawangsari et al.
found to have an influence negative on tax evasion by leverage, company size, and profitability.
Meanwhile, in the analysis carried out by Krisyadi & Vivian .
Susilowati et al.
, and Dini & Ginting .
no influence of leverage, company size and profitability was found on tax These conflicting results indicate a research gap that warrants further investigation.
Additionally, most previous studies do not specifically focus on the energy sector, despite its crucial role in IndonesiaAos economy and tax revenue fluctuations.
Given the sector's high exposure to global commodity price volatility and complex tax regulations, a more in-depth analysis is necessary.
This study aims to fill the research gap by analyzing tax avoidance in Indonesian energy sector companies over the past five years.
Unlike previous studies, this research expands the sample to include the entire energy sector, providing a more comprehensive understanding of tax avoidance behavior in this industry.
International Journal of Economics.
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reveals that agency theory is a bond of agreement between one or more actors .
who delegate decision-making authority in the operation of a business to another party .
The principal considers the agent to be more knowledgeable about the internal conditions of the company so that this delegation occurs.
The correlation between this theory and tax avoidance is that principals and agents have different missions.
Agents pursue their own interests that conflict with the principal's goals, thus creating a conflict of interest with the principal.
Delegation that occurs between the principal and the agent can cause agency conflict.
This conflict triggers management to manipulate financial report information presented to shareholders (Fadhila & Andayani, 2.
Conceptual Framework This study focuses on the factors of leverage, company size, and profitability that affect tax avoidance activities in companies.
The independent variable is tax avoidance.
While the variables of leverage, company size, and profitability act as dependent variables.
The relationship scheme between variables can be described in Figure 1.
Leverage (X.
Company Size (X.
Profitability (X.
H1 (-) Tax Avoidance (Tax avoidanc.
(Y) H2 ( ) H1 (-) Figure 1.
Research Model, 2024 The Effect of Leverage on Tax Avoidance The conceptual framework above illustrates the relationship between leverage and tax avoidance which has a negative effect.
The magnitude of the capital provision structure from a company's debt is indicated by the company's leverage ratio.
High capital financing from debt can cause an increase in the interest rate obtained, which can have an impact on reducing tax Companies that have minimal tax burdens tend to have smaller tax avoidance efforts (Junaidi et al.
, 2.
So the more aggressive the debt taken by the company, the less motive there is for corporate tax avoidance (Dewanti & Sujana, 2.
Agency theory asserts that there are differences of interest between the principal and the The company acting as an agent has a desire to gain large profits and small taxes, but this is inversely proportional to the principal's desire to receive maximum tax payments.
Some previous studies conducted by Monica Yuly and Meinie Susanty .
and research by Pascalia Indah and Abdul Haeba .
said that leverage has a negative effect on tax Using the justification given, the following conjectures can be made:
H1: Leverage has a negative effect on tax avoidance.
The Influence of Company Size on Tax Avoidance Tax avoidance behavior that occurs in a company can be influenced by the size of the The size of a company can be seen from the amount of assets controlled by the A company can be classified as a large company if the total assets controlled are International Journal of Economics.
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Since large companies carry out complex transactions, they take advantage of this situation to implement tax avoidance strategies (Rego, 2.
On the other hand, agency theory arises when managers try to save money by avoiding taxes in order to achieve high company value, but principals do not want to avoid taxes by falsifying financial reports (Habu & Darma, 2.
Previous research has been conducted by Khadijat Adenola and Kabir Yusuf .
and research by Fazliza Mohd and Natrah Saad .
shows that company size has a positive effect on tax avoidance.
Based on the previous description, the following is a hypothesis that can be made:
H2: Company size has a positive effect on tax avoidance.
The Influence of Profitability on Tax Avoidance According to Yustrianthe & Fatniasih .
Profitability ratio is an indication of how profitable a company is.
The high and low levels of company profits are consistent with the high and low levels of ROA which in this study are used to assess the profitability ratio.
The amount of income tax that must be paid can increase along with the company's income.
Companies with high taxes tend to take policies to avoid taxes as a result of this (H.
Sari et , 2.
This is also reinforced by agency theory that describes the relationship between principal and agent.
Although the principal wants optimal profit as a reflection of healthy company performance, the agent does not want the tax burden to increase so that there is a conflict with the principal (Jao & Holly, 2.
Research reviewed by Silpa Latipah Hariani & Waluyo .
Jackie Tantono.
Angela Irena, and Melati Putri .
, and Fazliza Mohd and Natrah Saad .
shows that there is a positive influence between profitability and tax avoidance, then the following hypothesis can be formulated:
H3: Profitability has a positive effect on tax avoidance.
Research Method The quantitative descriptive research method is used in this study to describe variables using numerical data.
This research examines the effect of leverage (DAR), firm size (SIZE), and profitability (ROA) on tax avoidance (ETR) in a population of companies.
The data analysis includes classical assumption tests, such as normality, multicollinearity, heteroscedasticity, and autocorrelation tests, followed by multiple linear regression analysis using the Ordinary Least Squares (OLS) method in SPSS 26.
To evaluate the relationships between variables, this study employs the t-test for partial significance, the F-test for simultaneous significance, and the coefficient of determination (RA) to measure how well the independent variables explain the dependent variable.
Secondary data are obtained from the financial reports of the studied companies, which are available on the Indonesia Stock Exchange website .
and the respective websites of the sample Population and Sample Population research is a company Energy sector listed on the Stock Exchange Indonesia (BEI).
The observation year is 2019Ae2023.
Energy sector companies are the research samples, and are selected based on the following qualifications through the use of purposive selection International Journal of Economics.
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Energy sector companies that uploaded comprehensive financial reports for the period 2019-2023 so that the data required for this study was available.
Does not indicate a negative ratio, meaning the company does not incur losses between 2019 and 2023.
Operationalization of Variables This study uses leverage, company size, and profitability as the independent variables, with tax avoidance as the dependent variable.
Variable Measurement Scale Tax Avoidance (Y) Tax Avoidance Variable (Y) In this study, it is proxied using ETR (Effective Tax Rat.
ycNycaycu yceycuycyyceycuycyce yaycNycI = ycEycyce Oe ycycaycu ycnycuycaycuycoyce Leverage(X.
Leverage is a ratio to determine the total amount of debt compared to total assets.
(Sitorus et al.
, 2.
The similarities are as follows:
ycNycuycycayco yccyceycayc yayceycayc ycycu yaycycyceyc ycIycaycycnycu = ycNycuycycayco ycaycycyceyc Company Size According to (Asri & Suardana, 2.
Company size refers to the scale of a business, determined by the total value of assets it controls.
Here is the calculation for company size:
ycIyaycsya = yaycA .
cNycuycycayco ycaycycycey.
Profitability Profitability is assessed through the ROA (Return on Asset.
ratio, which indicates the company's effectiveness in generating net profits from its assets (Nilasari & Arisyahidin, 2.
To measure the ROA variable, it is formulated as follows:
ycEycycuyceycnyc yceycuyc ycEayce ycyceycayc ycIycCya = ycNycuycycayco ycaycycyceyc Results and Discussion Results Research Sample Description The procedure used to obtain samples in this analysis applies the method purposive The sample selected by predetermined qualifications, resulting in the following Table 1.
Research Sample Criteria Total energy sector sompanies listed on BEI.
Energy sector companies that are not listed on BEI during the 2019-2023 period.
Energy sector companies that do not publish complete financial reports for the 2019-2023 period so the data required for this research is not available.
The company has losses during the 2019-2023.
Total Research Period Observation Data .
Outlier Data Total International Journal of Economics.
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Descriptive Statistics Minimum Maximum Mean Std.
Deviation Tax Avoidance 0,00 0,68 0,2417 0,13982 Leverage 0,09 0,84 0,4304 0,15669 Company Size
26,00
33,00
29,7353
1,28145
Profitability 0,01 0,62 0,1347 0,14751 Valid N .
102 Source: Processed Data by SPSS 26 .
The table shows the average value of the Leverage variable (X.
4304, which means that the leverage level in the selected sample companies is 43.
The Company Size variable (X.
shows an average value of 29.
The profitability variable has an average value of 1347, which means that the profitability level is at 13.
While the Y or Tax Avoidance variable has an average value of 0.
2417 or 24.
17%, which means that, there is tax avoidance activity in the selected sample companies because it is below the 25% corporate income tax Classical Assumption Test Results Normality Test Table 3.
Normality Test Unstandardized Residual Test Statistic 0,088 Asymp.
Sig.
-taile.
0,052c Source: Processed Data by SPSS 26 .
In the table, the Kolmogorov-Smirnov normality test found a sig.
value of 0.
052, which means that the results of the residual value normality test are normally distributed.
The research can be continued.
Multicollinearity Test Table 4.
Multicollinearity Test and Heteroscedasticity Test Collinearity Statistics Spearman's rho Model Tolerance VIF Sig.
-taile.
Leverage 0,903 1,108 0,298 Company Size 102
0,916
1,092
0,991
Profitability 0,832 1,202 0,873 Source: Processed Data by SPSS 26 .
The results of the Multicollinearity Test above show that in this study there were no symptoms of multicollinearity because each variable had a VIF value of less than 10.
00 and a tolerance value of more than 0.
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05 for each variable, thus no heteroscedasticity was detected.
Autocorrelation Test Table 5.
Model Summary Adjusted R Std.
Error of the DurbinModel
Square Square Estimate Watson
0,736
0,541
0,522
0,09636
1,935
Source: Processed Data by SPSS 26 .
Referring to the table above, the results show a du value of 1.
7383 < Durbin Watson 1.
< 4-du 2.
This can be concluded that there is no autocorrelation symptom.
Results of the Determination Coefficient Test (R.
Based on table 5, the Adjusted R Square value is 0.
522 which shows that the leverage variable (DAR), company size (Siz.
, and profitability (ROA) together have an influence on the tax avoidance variable (ETR) of 52.
While the other part .
% - 52.
2% = 47.
8%) is influenced by other variables that are not analyzed in this study.
Simultan F Test Results Table 6.
Simultan F Test Results Model Sum of Squares df Mean Square F Sig.
Regression 0,243 0,081 4,589 0,005b Residual 1,731 0,018 Total
1,975 101
Source: Processed Data by SPSS 26 .
Based on the table, the f-count .
> f-table .
and the significance value is 0.
which means it is less than 0.
05, so the conclusion from the data results indicates the leverage variable (DAR), company size (Siz.
, and profitability (ROA) simultaneously have an influence on tax avoidance (ETR) and this research model is accepted.
Partial t-Test Results Table 7.
Partial T-Test Results Model (Constan.
Leverage Company Size Profitability Unstandardized Coefficients Std.
Error
0,423
0,317
0,308
0,089
-0,011
0,011
0,027
0,098
Standardized Coefficients Beta
0,346
-0,098
0,028
1,334
3,471
-0,991
0,274
Sig.
0,185
0,001
0,324
0,784
Source: Processed Data by SPSS 26 .
Based on table 9, the significance value of the Leverage variable (X.
001 (<0.
which means that the Leverage variable has a significant effect on ETR as a measurement of Tax Avoidance.
Meanwhile, the Company Size (X.
and Profitability (X.
variables have significant values of 0.
324 and 0.
784 (>0.
respectively, which means that both variables have no effect on ETR (Tax Avoidanc.
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Y = 0.
308(DAR) - 0.
011(SIZE) 0.
027(ROA) e Discussion Leverage against Tax Avoidance Based on the results presented in the table above, the t-test for leverage (X.
on tax avoidance (Y) shows a t-count value of 3.
471, which is greater than the t-table value of 1.
with a significance level of 0.
001 (<0.
This indicates that leverage has a significant positive effect on ETR, meaning there is a negative relationship between leverage and tax avoidance.
In other words, an increase in leverage correlates with a decrease in tax avoidance activities, thus supporting hypothesis H1.
A higher level of leverage in a company signifies greater reliance on debt financing, which provides tax benefits through interest expense deductions.
The tax shield from interest reduces the company's incentive to engage in aggressive tax planning.
Additionally, highly leveraged companies are often subject to stricter oversight from creditors, which can deter them from implementing excessive tax avoidance strategies.
A similar finding was reported by Ainniyya et al.
, which revealed that leverage negatively affects tax avoidance.
This further strengthens the argument that debt-financed companies are more likely to prioritize compliance and risk mitigation over aggressive tax avoidance strategies.
Therefore, policymakers and financial regulators may consider leverage as a crucial factor in assessing corporate tax compliance and designing more effective tax Company Size (Siz.
on Tax Avoidance According to the data processing results in Table 4, the t-test for firm size (X.
on tax avoidance (Y) shows a t-count value of -0.
991, which is smaller than the t-table value of 98447, with a significance level of 0.
324 (>0.
This indicates that firm size does not have a statistically significant effect on ETR, leading to the rejection of hypothesis H2.
In other words, the size of a companyAiwhether large or smallAidoes not influence its tax avoidance Theoretically, larger firms may have more resources to engage in tax planning, while smaller firms may have fewer regulatory pressures.
However, the findings suggest that tax avoidance is driven more by managerial discretion and corporate strategy rather than firm size Tax obligations apply to all registered taxpayers, including both individuals and business entities, irrespective of company size.
Consequently, tax avoidance decisions appear to be influenced by other factors such as financial policies, corporate governance, and risk management strategies rather than the mere scale of operations.
This study aligns with the findings of Baroroh et al.
, who also concluded that firm size does not have a significant impact on tax avoidance.
These results highlight the need for further research into alternative determinants of corporate tax avoidance beyond firm size.
Profitability against Tax Avoidance The results of the data processing for the profitability test (X.
on tax avoidance (Y) show that the t-count value .
is lower than the t-table value .
Additionally, the significance value .
784, which is greater than 0.
Based on these results, it can be concluded that profitability does not have a significant effect on tax avoidance, leading to the International Journal of Economics.
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This indicates that the level of profitability in a company does not determine its tax avoidance practices.
Energy sector companies in Indonesia listed on the IDX generally exhibit a good level of profitability in generating profits.
The descriptive statistics for the profitability variable show a mean value of 0.
1347 or 13.
47%, which is Ou 5.
98%, indicating a strong financial performance.
Companies with stable profitability are often viewed as being more capable of fulfilling their tax obligations, reducing the need for aggressive tax planning strategies.
This suggests that tax avoidance may be influenced by other factors, such as financial policies, corporate governance, or managementAos risk appetite, rather than merely the companyAos ability to generate profits.
These findings align with the study conducted by Wanda & Halimatusadiah .
, which also found no significant relationship between profitability and tax avoidance.
This reinforces the argument that tax avoidance behavior is not solely determined by a companyAos earnings but rather by broader strategic and regulatory considerations.
Further research could explore other determinants, such as corporate governance practices or industry-specific regulations, to gain a more comprehensive understanding of tax avoidance dynamics.
Conclusion The conclusion of this study reveals that there is tax avoidance activity in Energy sector companies listed on the IDX for the 2019-2023 period as evidenced by the average value of the tax avoidance variable in descriptive statistics being below the 25% Corporate Income Tax Simultaneously, the leverage, company size and profitability variables have an influence on tax avoidance.
This is reinforced by the probability value below 0.
00 5 and the F-count result is higher than the F-table, which means that these variables influence each other in tax avoidance practices.
The confirmed leverage has a partial negative effect on tax avoidance, with a probability value of 0.
001 and is clarified by the large t-count.
This indicates that companies in organizing their tax obligations are influenced by the level of company leverage.
Although company size and profitability are factors of tax avoidance along with leverage, further analysis of these two variables did not find any impact on tax avoidance.
This is supported by the probability results which are both above 0.
005 and the t-count which is relatively small.
This finding shows that the policy-making of tax avoidance strategies in energy sector companies does not depend on the factors of company size and profitability.
References