Indonesian publicly traded mining
companies engage in tax avoidance strategies driven by internal financial
pressures, operational scale, and cross-border transactions, according to a
recent study by researchers Burhanudin, Kodriyah, Tri Wahyuni Sukiyaningsih,
and Nabila Nurfayza from Universitas Serang Raya. Published in 2026 in the International
Journal of Applied Economics, Accounting and Management (IJAEAM), the
peer-reviewed study demonstrates that corporate tax planning strategies in
Indonesia's natural resource sector are strongly influenced by financial
distress, overall company size, and transfer pricing practices. The research
provides critical insights into how corporate managers legally minimize
corporate tax obligations in an emerging market economy, highlighting
significant structural challenges for national revenue collection.
Corporate Tax Behavior in
Emerging Resource Economies
Tax collection remains a
fundamental source of government revenue in Indonesia, funding public
infrastructure, essential social programs, and economic development
initiatives. Despite its economic importance, Indonesia's tax-to-GDP ratio
historically trails behind regional peers, creating ongoing challenges for
national budget sustainability. Within capital-intensive industries such as
mining, public corporations possess significant leeway to manage financial
reporting and strategic tax planning. Because corporate tax avoidance operates
within legal boundaries while exploiting statutory ambiguities, identifying its
primary determinants is crucial for regulatory bodies, tax policy designers,
and financial analysts seeking to close legislative loopholes and safeguard
public finance stability.
Quantitative Panel Regression
Methodology
To evaluate corporate tax
behavior, the research team analyzed empirical financial data from mining
sector companies listed on the Indonesia Stock Exchange (IDX) spanning the
2023–2025 period. Using a quantitative, causal-comparative research design, the
authors constructed a sample comprising 60 company-year observations. The data
were gathered directly from audited corporate annual reports and financial
statements. Using the statistical package EViews 12, the researchers conducted
panel data regression analysis. Diagnostic procedures—including the Chow test
and Lagrange Multiplier test—confirmed that the Common Effect Model (CEM) was
the most statistically appropriate estimation model for evaluating the panel
dataset.
Key Empirical Findings
The empirical analysis
established statistically significant positive relationships between all three
hypothesized factors and corporate tax avoidance:
- Transfer Pricing Impact: Transfer pricing
emerged as the single most influential determinant of tax avoidance,
recording the highest regression coefficient ($\beta = 0.205355, p =
0.0279$). Companies reporting high proportions of related-party
transactions exhibited significantly greater tax avoidance behavior.
- Firm Size Dynamics: Firm size demonstrated a
positive and statistically significant relationship with tax avoidance ($\beta
= 0.017570, p = 0.0352$). Larger mining enterprises systematically utilize
their superior financial resources, organizational complexity, and
specialized tax expertise to execute sophisticated tax planning
strategies.
- Financial Distress Incentives: Financial
distress exerted a positive and statistically significant influence on tax
avoidance ($\beta = 0.013688, p = 0.0467$). Companies facing financial
difficulties systematically escalate tax avoidance activities to preserve
liquidity, reduce cash outflows, and maintain operational continuity
during periods of financial stress.
Industry and Policy
Implications
These findings offer vital
practical implications for revenue authorities, financial regulators, and
corporate governance practitioners. Because transfer pricing presents the
largest channel for tax minimization, tax authorities must prioritize the enforcement
of arm's length principles, tighten documentation mandates, and expand
corporate audit capacity concerning intra-group transactions. Furthermore,
regulatory oversight should be specifically tailored to account for distinct
corporate profiles: large firms require close monitoring due to their
capability to deploy complex international tax planning structures, while
financially distressed companies warrant targeted scrutiny as liquidity
pressures frequently drive aggressive cash-preservation tactics.
"Transfer pricing, firm
size, and financial instability all have a positive and significant impact on
tax avoidance. These findings suggest that companies with higher levels of
related-party transactions, larger organizational sizes, and financial challenges
are more likely to employ tax evasion tactics," state lead researchers
Burhanudin, Kodriyah, Tri Wahyuni Sukiyaningsih, and Nabila Nurfayza of
Universitas Serang Raya.
Author Profiles
- Burhanudin, M.Si. – Researcher and academic
in accounting and financial management at Universitas Serang Raya,
specializing in corporate tax strategies and corporate reporting.
- Kodriyah, M.Si. – Corresponding author and
faculty member at Universitas Serang Raya, expert in financial accounting,
corporate tax avoidance, and empirical capital market research.
- Tri Wahyuni Sukiyaningsih, M.Si. – Scholar
at Universitas Serang Raya focusing on corporate finance, accounting
information systems, and tax compliance.
- Nabila Nurfayza, S.Ak. – Financial
researcher at Universitas Serang Raya specializing in empirical tax
analysis and corporate financial distress evaluation.
Source Information
- Article Title: Drivers of Tax Avoidance:
Evidence from Indonesian Mining Companies
- Journal: International Journal of Applied
Economics, Accounting and Management (IJAEAM)
- Publication Year: 2026
- DOI: https://doi.org/10.59890/ijaeam.v4i4.195
- Official URL: https://mrymultitechpublisher.my.id/index.php/ijaeam/index
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