FOKUS EKONOMI | Jurnal Ilmiah Ekonomi P-ISSN: 1907-1603 E-ISSN: 2549-8991 Vol.
20 No.
THE EFFECT OF CAPITAL INTENSITY,
INVENTORY INTENSITY.
AND DEBT
COVENANT ON TAX AVOIDANCE
WITH SALES GROWTH AS A
MODERATING VARIABLE
Daniel.
and Puspita Handayani.
AFFILIATION:
Universitas Pamulang CORRESPONDENCE:
unpam@gmail.
ARTICLE HISTORY
Received:
20 August 2025 Revised:
September 3, 2025 Accepted:
September 27, 2025 THIS ARTICLE IS AVAILABLE IN:
http://ejournal.
id/index.
php/fe This work is licensed under a Creative Commons Attribution-ShareAlike 4.
International (CC BY-SA 4.
Page 297 Abstract: This study aims to analyze the influence of Capital Intensity.
Inventory Intensity, and Debt Covenants on Tax Avoidance, with Sales Growth as a moderating The research was conducted by analyzing the financial statements of Property & Real Estate sector companies listed on the Indonesia Stock Exchange (IDX) from the official website of the Indonesia Stock Exchange (IDX) for the period 2019Ae2023.
The sample used in this study consisted of 40 companies, with the sampling method employing purposive sampling.
The data used in this study were secondary data in the form of financial statements and annual reports from each Property & Real Estate sector company included in the research sample.
The study focuses on the variables Capital Intensity (X.
Inventory Intensity (X.
, and Debt Covenant (X.
as independent variables.
Tax Avoidance (Y) as the dependent variable, and Sales Growth (Z) as the moderating variable.
The results show that the best-selected model for this study is the Random Effects Model (REM).
The findings indicate that Capital Intensity.
Inventory Intensity, and Debt Covenant do not individually influence Tax Avoidance.
However.
Sales Growth is only able to moderate the interaction between Capital Intensity and Tax Avoidance.
Simultaneously.
Capital Intensity.
Inventory Intensity, and Debt Covenant collectively have an effect on Tax Avoidance.
Keywords: capital intensity, inventory intensity, debt covenant, tax avoidance, sales INTRODUCTION Taxes are the largest component in Indonesia's State Revenue and Expenditure Budget (APBN), contributing around 70% of the total state revenue in 2023.
Tax revenue is heavily influenced by economic growth, where FOKUS EKONOMI | Jurnal Ilmiah Ekonomi economic slowdowns impact the decline in actual tax collections, as occurred in 2020 and 2023.
Additionally, the decrease in the contribution of Corporate Income Tax (PPh Bada.
is also a concern, despite the government lowering the Corporate Income Tax rate to attract investment.
Table 1.
Tax Revenue Development and Target Realization Year Tax Revenue Source: CNBC Indonesia Targeted Tax Revenue Tax Revenue Ratio In Trillion Rupiah Increase / Decrease -16% -11% However, tax avoidance is still commonly practiced by companies to reduce their tax burden by exploiting regulatory loopholes, such as managing debt, inventories, and fixed asset For example, property and real estate sector companies like PT Lippo Karawaci Tbk utilize large amounts of debt to reduce taxable income and tax burden.
Other factors influencing tax avoidance include capital intensity .
ixed asset intensit.
, inventory intensity, and debt covenants, which can be monitored through leverage or debt-to-equity ratio.
LITERATURE REVIEW
The Effect of Capital Intensity on Tax Avoidance Capital intensity is the amount of non-current assets invested in a company's assets.
Depreciation costs on non-current assets can be expensed fiscally in accordance with Law 36/2008 on Income Tax Article 6 paragraph .
(Alamsyah et al.
, 2.
Capital intensity is defined as the extent to which a company invests its assets in fixed assets and inventories.
Fixed asset intensity is the proportion of a company's fixed assets to its total assets.
Capital intensity is often used by companies to reduce their tax burden because it can be expensed as a deduction in accordance with Article 6 paragraph 1b of Law 36/2008 on Income Tax.
This is related to agency theory, which views companies as agents and the government as principals.
The agency theory explains the different conflicts of interest between the agent and the principal.
In this case, the government as the principal has an interest in achieving tax revenue targets from taxpayers, while companies want to achieve or have maximum profits but be efficient in paying taxes (Sobarudin & Ruhiyat, 2.
H1: It is hypothesized that capital intensity has a partial effect on tax avoidance.
The Effect of Inventory Intensity on Tax Avoidance Inventory intensity is a ratio of the amount of inventory to total assets, which shows how much a company invests in inventory assets.
Increased inventory intensity can minimize the tax burden that a company has to pay.
This is due to the costs associated with Article 6 of Law 36/2008 .
osts of acquiring, maintaining, and collectin.
, where high inventory levels are related to the costs of acquiring and storing inventory.
Therefore, a company's taxable income can be reduced by the costs associated with inventory.
The agency theory related to Inventory Intensity and Tax Avoidance states that companies take advantage of regulations that allow certain costs to be deducted or recognized as expenses in fiscal financial statements.
The higher the inventory held by a company, the greater the expense, which will impact fiscal profit or result in lower fiscal Based on the above theory, previous research by Saragih et al.
suggests that Inventory Intensity has a significant influence on Tax Avoidance, which can be formulated as H2: It is hypothesized that Inventory Intensity has a partial influence on Tax Avoidance.
The Effect of Debt Covenants on Tax Avoidance A debt covenant is a contract or agreement between a lender .
and a borrower .
that sets out certain restrictions or obligations that the borrower must comply with during the loan period.
The purpose is to protect the interests of creditors by limiting actions by THE EFFECT OF CAPITAL INTENSITY.
INVENTORY INTENSITY.
AND DEBT COVENANT ON TAX AVOIDANCE WITH SALES GROWTH AS A MODERATING VARIABLE Daniel and Puspita Handayani Page 298 FOKUS EKONOMI | Jurnal Ilmiah Ekonomi P-ISSN: 1907-1603 E-ISSN: 2549-8991 Vol.
20 No.
managers that could potentially harm creditors, such as excessive dividend distributions, taking out additional loans without permission, or managing assets in a way that could reduce the value of collateral (Pangaribuan, 2.
A debt covenant is a contract directed at the debtor by the creditor's decision to limit activities that have the potential to damage the value of the loan and recovery, so that the agreement imposes restrictions on managers to prevent losses (Sari & Kurniato, 2.
Leverage is one indicator to determine the limits of a loan contract or agreement, where the contract includes restrictions on the extent of a company's risk in repaying its debt.
Companies that use loans or debt as a source of funding will incur costs associated with the debt, known as interest expenses.
The higher the leverage ratio, the higher the entity's debt.
High debt can also result in high interest expenses.
This can lead to a decrease in the company's profits.
Increasing corporate debt can have an impact on companies with high tax burdens to save on taxes.
Property & Real Estate companies require large amounts of capital for their business activities, as the nominal value of their transactions is also quite large.
Based on the above theory, previous research by Sari & Kurniato .
suggests that Inventory Intensity has a significant influence on Tax Avoidance, which can be formulated as follows:
H3: It is suspected that Debt Covenant has a partial influence on Tax Avoidance.
The Effect of Capital Intensity.
Inventory Intensity, and Debt Covenant on Tax Avoidance Capital Intensity, according to Dewi & Oktaviani .
, refers to the extent to which a company allocates capital to fixed assets such as buildings, machinery, and equipment.
These fixed assets undergo periodic depreciation, which becomes a cost burden to the company, thereby reducing pre-tax profit .
axable incom.
Consequently, higher Capital Intensity increases depreciation expenses that contribute to lowering taxable income, facilitating corporate tax This tax avoidance potential arises because companies can legally use depreciation policies to reduce taxable income.
Inventory Intensity measures the proportion of inventories held by the company relative to its total assets.
Inventory is a vital part of current assets needed to sustain production and market demand continuously.
The higher the inventory intensity, the greater the costs incurred, including maintenance, storage, and risks of obsolescence or damage.
These inventory-related costs reduce the companyAos net profit and, ultimately, the taxes paid.
Thus.
Inventory Intensity not only impacts operational and financial performance but also serves as a strategy to lower the tax burden through Tax Avoidance.
Debt Covenant is an agreement between creditors and debtors designed to protect the creditorsAo interests by limiting managerial actions that could harm creditorsAo positions, such as excessive dividend payments or reducing working capital below a certain threshold.
The risk of breaching such covenants can have serious consequences, prompting management to use accounting practices like earnings management to reduce default risk by shifting profits from future periods to the current period.
In this study.
Debt Covenant is proxied by leverage, which is the ratio of total debt to total assets of the company.
High leverage indicates significant use of debt in the capital structure, which is often employed by companies to reduce taxable income through interest expense recognition .
ax shiel.
, thereby contributing to tax avoidance practices.
H4: Capital intensity, inventory intensity, and debt covenants are suspected to have a simultaneous effect on tax avoidance.
Sales Growth Moderates the Effect of Capital Intensity on Tax Avoidance Sales growth is an indicator used to measure a company's ability to generate income.
Sales growth is measured by looking at the difference between this year's sales and last year's sales and comparing it to last year.
Sales growth can illustrate how well a company is maintaining its profits.
In relation to tax avoidance, sales growth is related to the tax burden that a company must pay.
a company has positive sales growth, then there will be an increase in the tax burden that must be paid (Alamsyah et al.
, 2.
Capital Intensity serves as an indicator of how much a company invests its capital in fixed assets.
The size of fixed assets is expected to increase profitability by increasing production operational capacity.
Capital Intensity is the amount of assets invested in fixed assets with the aim of increasing profits.
The larger the fixed assets, the greater the depreciation expense that can reduce taxable income, making it one of the tax avoidance strategies Page 299 FOKUS EKONOMI | Jurnal Ilmiah Ekonomi (Ishak & Asalam, 2.
Sales growth can affect the ups and downs of a company's revenue or net Positive sales growth encourages increased production capacity and greater investment in fixed assets, which in turn affects the depreciation expense of fixed assets.
Therefore, high sales growth has the potential to enable companies to utilize their capital intensity to reduce tax expenses through depreciation.
H5: Sales Growth is thought to moderate the effect of Capital Intensity on Tax Avoidance.
Sales Growth Moderates the Effect of Inventory Intensity on Tax Avoidance According to Wirastuti and Yadnyana .
Sales Growth serves as an indicator of a companyAos demand and competitiveness within an industry.
The higher the sales growth, the larger the tax burden the company incurs.
Sales growth reflects successful investments from previous periods and can be used to predict future sales growth (Maharani & Setyawati, 2.
Inventory Intensity measures how much a company invests in its inventory or goods held.
The larger the inventory, the higher the maintenance and storage costs borne by the company (Maharani & Setyawati, 2.
Inventory Intensity, as part of current assets, supports long-term operational needs.
however, large inventory investments incur expenses that reduce company revenue and ultimately decrease profit (Rahmania et al.
, 2.
High sales growth allows companies to increase production capacity and inventory volume to meet market demand.
Large inventory availability leads to increased operational expenses such as maintenance and storage These expenses can be used by companies to lower their tax burden since costs related to business activities can be recognized as deductions from taxable income.
H6: Sales Growth is suspected to moderate the effect of Inventory Intensity on Tax Avoidance Sales Growth Moderates the Effect of Debt Covenants on Tax Avoidance A debt covenant is an agreement in a debt contract designed to protect the interests of lenders .
This agreement typically restricts management activities, such as preventing excessive dividend payments, taking out additional loans without permission, or reducing working capital below a certain limit.
The main purpose of establishing this covenant is to maintain the company's financial stability so that it remains able to meet its debt obligations.
Violating these debt agreements can have serious consequences for the company, such as increased borrowing costs or withdrawal of credit facilities.
Therefore, management is often compelled to implement certain accounting strategies, one of which is to transfer profits from future periods to the current period.
In this way, the company attempts to present a healthier financial condition and reduce the risk of default in the eyes of lenders.
Debt covenants usually arise from long-term loans and their magnitude can be measured by the value of the company's long-term liabilities.
The high value of the covenants that must be met encourages strict supervision of the company's financial activities by creditors.
This requires management to be careful in managing debt and financial reporting in order to meet the limits agreed upon in the agreement.
In addition to protecting creditors' interests, debt covenants also influence management decisions regarding the presentation of financial statements.
To secure desired loans, management often employs accounting strategies to make financial statements appear more favourable, such as by boosting profit growth or adjusting certain financial items.
Such practices can impact the transparency of financial statements while also influencing the company's tax avoidance behaviour.
H7: Sales Growth is suspected to moderate the influence of Debt Covenant on Tax Avoidance Based on the hypothesis described, the research model can be illustrated in the following THE EFFECT OF CAPITAL INTENSITY.
INVENTORY INTENSITY.
AND DEBT COVENANT ON TAX AVOIDANCE WITH SALES GROWTH AS A MODERATING VARIABLE Daniel and Puspita Handayani Page 300 FOKUS EKONOMI | Jurnal Ilmiah Ekonomi P-ISSN: 1907-1603 E-ISSN: 2549-8991 Vol.
20 No.
Figure 1.
Research Model
METHODS
Population and Sample This research utilizes secondary data obtained from manufacturing firms within the basic and chemical industry subsector that are listed on the Indonesia Stock Exchange (IDX).
The data covers the reporting period from 2021 to 2023.
The population consists of 108 companies, and the sampling technique used is Purposive Sampling.
The criteria for selecting the sample are as Companies that have submitted annual reports consecutively for five years from 2019 to 2023.
Companies that have consistently generated profits .
o losse.
throughout the study period, from 2021 - 2023.
Companies that report their financial statements in Indonesian Rupiah (IDR).
Type and Unit of Analysis This study uses a quantitative approach with secondary data in the form of annual financial reports of companies in the Property & Real Estate sector.
According to Sugiyono .
, quantitative research is a method that examines a specific population or sample using documentation and statistical analysis to test hypotheses in a systematic, structured, and detailed This study uses secondary data obtained from other parties.
Secondary data is data obtained from data collectors or through documents.
The data obtained in this study was sourced from each company's website and the Indonesia Stock Exchange website .
Operational Definition of Variables Capital intensity Capital intensity refers to investments made by companies in the form of fixed assets to support their operations (Rismawati & Atmaja, 2.
According to Rosdiana .
, capital intensity refers to investment activities in the form of fixed assets carried out by companies.
This ratio is very important for company management, as it can indicate the level of efficiency with which the company uses its assets to generate sales (Aulia & Purwasih, 2.
yaycaycyycnycycayco yaycuycyceycuycycnycyc = ycNycuycycayco ycAycuycu yaycycycyceycuyc yaycycyceycyc ycNycuycycayco yaycycyceycyc Inventory Intensity Inventory Intensity is the amount or size of inventory that a company has to produce a product to be sold or equipment to be used in the production process or service provision.
Inventory affects a company's income.
the larger the company's inventory, the greater the cost of maintaining it.
According to Dwiyanti & Jati .
Inventory Intensity can be formulated as Page 301 FOKUS EKONOMI | Jurnal Ilmiah Ekonomi yaycuycyceycuycycuycyc yaycuycyceycuycycnycyc = ycNycuycycayco yaycuycyceycuycycuycyc ycNycuycycayco yaycycyceycyc Debt Covenant A debt covenant is a contract intended for borrowers to limit activities that could reduce the value of the loan and loan repayments (Pangaribuan, 2.
Debt covenants are closely related to leverage, because the higher the leverage, the greater the restrictions in the debt contract.
The Debt Covenant variable is measured using the Debt to Equity Ratio (DER) proxy.
According to Wahidirani Saputri et al.
, the Debt to Equity Ratio (DER) can be formulated as follows:
yayaycI = ycNycuycycayco ycOycycaycuyci ycNycuycycayco yaycoycycnycycayc Sales Growth is a method for measuring a company's progress in generating revenue over a certain period.
Positive growth indicates that the company has experienced an increase in revenue, while negative growth indicates that the company has experienced a decline in sales.
This is directly proportional, meaning that if a company experiences sales growth, it will cause its tax burden to increase.
The formula used to measure Sales Growth:
ycIycaycoyceyc yaycycuycycEa = ycIycaycoyceyc.
Oe ycIycaycoyceyc.
c Oe .
ycIycaycoyceyc.
c Oe .
RESEARCH RESULTS Hypothesis Testing .
-tes.
First Hypothesis The probability value of the capital intensity variable is 0.
6939, which is greater than the significance value of 0.
Therefore, it can be concluded that the capital intensity variable does not affect the tax avoidance variable at a significance level of 5%.
Second Hypothesis The probability value of the inventory intensity variable is 0.
8939, which is greater than the significance value of 0.
Therefore, it can be concluded that the inventory intensity variable does not affect the tax avoidance variable at a significance level of 5%.
Third Hypothesis The probability value of the debt covenant variable is 0.
8979, which is greater than the significance value of 0.
Therefore, it can be concluded that the inventory intensity variable does not affect the tax avoidance variable at a significance level of 5%.
Simultaneous Hypothesis Testing (F-tes.
Table 2.
Result F-Test F-statistic Prob (F-statisti.
F-Test & Coefficient Determination (R.
Based on the data analysis results, the probability value (F-statisti.
0001, which means that this value is smaller than the significance level of 0.
Therefore, it can be concluded that all independent variables in this study, namely capital intensity, inventory intensity, and debt covenant, have an effect on the tax avoidance variable.
This means that the regression equation obtained can be used to predict tax avoidance or the model is suitable for use in this study.
The Moderating Effect of Sales Growth on the Relationship between Capital Intensity and Tax Avoidance Based on the moderation test results, it can be seen that the Sales Growth variable can moderate Capital Intensity towards Tax Avoidance with a sig value of 0.
0001 < 0.
The Moderating Effect of Sales Growth on the Relationship between Inventory Intensity and Tax Avoidance THE EFFECT OF CAPITAL INTENSITY.
INVENTORY INTENSITY.
AND DEBT COVENANT ON TAX AVOIDANCE WITH SALES GROWTH AS A MODERATING VARIABLE Daniel and Puspita Handayani Page 302 FOKUS EKONOMI | Jurnal Ilmiah Ekonomi P-ISSN: 1907-1603 E-ISSN: 2549-8991 Vol.
20 No.
Based on moderation, it can be seen that the Sales Growth variable cannot moderate Inventory Intensity towards Tax Avoidance with a sig value of 0.
0534 > 0.
The Moderating Effect of Sales Growth on the Relationship between Debt Covenant and Tax Avoidance Based on moderation, it can be seen that the Sales Growth variable cannot moderate Inventory Intensity against Tax Avoidance with a sig value of 0.
7353 > 0.
CONCLUSION
This study uses eight samples of companies in the property and real estate sector listed on the Indonesia Stock Exchange (IDX) for the period 2019Ae2023 to examine the effect of capital intensity, inventory intensity, and debt covenants on tax avoidance, with sales growth as a moderating variable, using Eviews-12 software.
The results indicate that, individually, the three independent variables do not have a significant effect on Tax Avoidance, but collectively they do have a significant effect.
Sales Growth only moderates the relationship between Capital Intensity and Tax Avoidance, but not between Inventory Intensity and Debt Covenant.
The limitations of the study include the small sample size .
samples from 8 companie.
due to the impact of the Covid-19 pandemic and the coefficient of determination (RA) value of 46.
89%, which means that 10% of the variability in Tax Avoidance is explained by other factors that were not tested.
It is recommended that future research increase the sample size by including broader sectors or periods and add or replace research variables to obtain more comprehensive results.
REFERENCES