The findings matter because tax revenue remains a critical source of funding for Indonesia’s national development programs. While tax avoidance is generally legal and involves using existing regulations to reduce tax obligations, widespread use of such strategies can reduce government revenue and limit public investment in infrastructure, education, healthcare, and other development priorities.
Why Tax Avoidance Remains a Major Issue
Indonesia has continued efforts to improve tax collection, yet challenges remain. The country’s tax ratio—the proportion of tax revenue to gross domestic product (GDP)—has fluctuated in recent years despite increases in total tax receipts. Policymakers have long expressed concern that aggressive tax planning by corporations may reduce the effectiveness of tax collection efforts.
The food and beverage manufacturing sector provides an important context for examining tax avoidance. The industry is a major contributor to Indonesia’s economy, characterized by steady sales growth, substantial investments in fixed assets, and expanding market demand. These characteristics create opportunities for companies to engage in sophisticated tax planning strategies while remaining within legal boundaries.
Previous cases involving large corporations have also increased public attention toward corporate tax practices, encouraging researchers to investigate the financial factors associated with tax avoidance behavior.
How the Research Was Conducted
The study analyzed financial data from food and beverage manufacturing companies listed on the Indonesia Stock Exchange (IDX) during the 2022–2024 period.
Researchers selected companies using purposive sampling criteria, focusing on firms that:
- Were continuously listed on the IDX from 2022 to 2024.
- Reported financial statements in Indonesian rupiah.
- Published complete annual financial reports.
- Generated profits during the study period.
A total of 144 observations from 48 companies were examined.
The researchers evaluated four main factors:
- Profitability, measured through Return on Assets (ROA).
- Capital Intensity, measured by the proportion of fixed assets to total assets.
- Sales Growth, measured by changes in annual sales performance.
- Audit Committee Size, measured by the number of audit committee members.
Tax avoidance was measured using the Effective Tax Rate (ETR), calculated by dividing tax expense by profit before tax. Statistical regression analysis was then used to determine which factors significantly influenced corporate tax avoidance practices.
Key Findings
The study found that three financial factors significantly influence tax avoidance behavior among Indonesian food and beverage companies.
1. Profitability Influences Tax Avoidance
Companies with higher profitability were more likely to engage in tax planning strategies associated with tax avoidance.
According to the researchers, highly profitable firms possess greater flexibility in managing assets, financial structures, and available tax incentives. As profits increase, the incentive to reduce tax burdens also becomes stronger.
2. Capital Intensity Plays a Significant Role
The research found that capital intensity significantly affects tax avoidance.
Companies with large investments in fixed assets can utilize depreciation expenses to legally reduce taxable income. Because depreciation lowers reported profits for tax purposes, firms with substantial fixed assets may achieve lower effective tax burdens without violating regulations.
3. Sales Growth Encourages Tax Planning
Rapidly growing companies were also associated with higher levels of tax avoidance.
As sales increase, profits generally rise as well. Higher profits create larger tax obligations, motivating some firms to adopt more aggressive tax-planning strategies to manage their tax expenses.
4. Audit Committees Show No Significant Effect
Unlike the other variables, audit committee size did not significantly influence tax avoidance behavior.
The findings suggest that simply increasing the number of audit committee members does not automatically improve oversight of tax-related decisions. The effectiveness, independence, and quality of audit committee work may be more important than committee size alone.
What the Findings Mean
The research offers several important implications for businesses, investors, and policymakers.
For corporate management, the study highlights the need to balance legitimate tax planning with long-term compliance and reputational considerations. Companies with strong profitability and rapid growth may face increased scrutiny from tax authorities if aggressive tax strategies are perceived as excessive.
For investors, the findings serve as a reminder that strong financial performance does not always reflect operational efficiency alone. Tax strategies can also influence reported earnings and profitability measures.
For government agencies, the results suggest that tax oversight efforts may need to focus more closely on highly profitable and rapidly growing firms. Regulators may also consider reviewing depreciation-related tax provisions to ensure they support productive investment without creating opportunities for excessive tax avoidance.
Researchers Emphasize Better Oversight
The authors argue that stronger monitoring mechanisms and periodic reviews of tax regulations could help reduce excessive tax avoidance practices.
According to Inge Florensia and Andreas Bambang Daryatno of Tarumanagara University, profitability, capital intensity, and sales growth were all found to significantly affect corporate tax avoidance, while audit committee size alone was not a reliable predictor of tax behavior. The researchers recommend improving tax supervision and evaluating existing regulations to ensure that legal tax planning does not undermine government revenue collection.
Author Profiles
Inge Florensia
Professional Accounting Education Program (PPAk), Tarumanagara University, Jakarta
Inge Florensia is an accounting researcher specializing in taxation, financial reporting, corporate governance, and corporate financial behavior. Her research focuses on factors influencing tax compliance and tax avoidance among Indonesian companies.
Andreas Bambang Daryatno
Professional Accounting Education Program (PPAk), Tarumanagara University, Jakarta
Andreas Bambang Daryatno is an accounting academic and professional practitioner with expertise in taxation, auditing, financial accounting, and corporate governance. His work focuses on improving accounting practices and tax compliance in Indonesian businesses.
Source
Article Title: Factors Which Influence Tax Avoidance in Food and Beverage Companies on the IDX
Authors: Inge Florensia and Andreas Bambang Daryatno
Journal: International Journal of Economic, Finance and Business Statistics (IJEFBS)
Year: 2026
Volume/Issue: Vol. 4, No. 3, pp. 197–214
DOI: https://doi.org/10.59890/ijefbs.v4i3.6
URL: http://journalijefbs.my.id/index.php/ijefbs
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