Financial Determinants of Corporate Tax Avoidance: The Moderating Role of Firm Size in Indonesian Listed Companies

Abstract

This study aims to examine the effect of financial performance, represented by profitability, liquidity, and sales growth, on tax avoidance with firm size as a moderating variable in consumer goods manufacturing companies listed on the Indonesia Stock Exchange (IDX) during the 2021–2024 period. Tax avoidance is measured using the Effective Tax Rate (ETR), while profitability is proxied by Return on Assets (ROA), liquidity by Current Ratio (CR), sales growth by Sales Growth (SG), and firm size by the natural logarithm of total assets. This study employed a quantitative research approach using secondary data obtained from the companies' annual financial reports. The research sample consisted of 48 companies with 192 firm-year observations. After data transformation and outlier treatment to satisfy the normality assumption, 165 observations were analyzed using panel data regression and Moderated Regression Analysis (MRA) with EViews 13. The results indicate that profitability and liquidity do not significantly affect tax avoicance. Meanwhile, sales growth has a positive and significant effect on tax avoidance. Furthermore, firm size is unable to moderate the relationship between profitability and tax avoidance or between liquidity and tax avoidance.
However, firm size is proven to moderate the relationship between sales growth and tax avoidance. The findings are expected to contribute to the development of tax accounting literature and provide useful insights for companies, investors, and regulators in understanding the determinants of corporate tax avoidance.