JAKARTA, Formosa News — Tax efficiency practices, or tax
avoidance, in the manufacturing sub-sector of food and beverage companies in
Indonesia are not solely driven by the scale of profits earned. Company size
plays a key role in controlling and directing how sales growth and
profitability influence corporate tax policies. This crucial finding was
revealed in recent scientific research conducted by Siti Halimahtussadiah and
Richad Alamsyah from the Kesatuan Institute of Business and Informatics,
published in 2026.
The study analyzed the annual financial statements of 24 food and
beverage manufacturing companies listed on the Indonesia Stock Exchange (IDX)
across the 2020–2024 period, encompassing 120 data observations. This research
is particularly relevant given that Indonesia's tax-to-GDP ratio remains low
compared to neighboring countries in the ASEAN region. Data from the
Organisation for Economic Co-operation and Development (OECD) indicates that
Indonesia's tax ratio in 2024 reached only 10.12 percent, highlighting
sub-optimal tax contributions from the corporate sector toward national
revenue.
The Dilemma of Tax Savings and Market Oversight
The background of this research stems from the fluctuating dynamics of
national tax collection. In 2020, Indonesia's realized tax revenue reached only
91.50 percent of its target due to the impacts of the COVID-19 pandemic.
Although tax revenue recovered between 2021 and 2024, tax avoidance—the
strategy of legally reducing tax liabilities by exploiting legal
loopholes—remains a major concern for tax authorities and business entities
alike.
Theoretically, corporate management often faces incentives to maximize
net profits for shareholders, as described by Agency Theory. However, based on
the Theory of Planned Behavior (TPB), management decisions regarding tax
planning are also shaped by subjective norms, behavioral controls, perceived
sanction risks, and the imperative to maintain corporate reputation.
A Rigorous Yet Accessible Research Methodology
To examine the relationships among these variables, Siti
Halimahtussadiah and Richad Alamsyah utilized an associative quantitative
approach using a purposive sampling technique. Secondary data were collected
from official corporate financial reports accessed via the Indonesia Stock
Exchange portal.
Data processing was performed using panel data regression and Moderated
Regression Analysis (MRA) via E-Views 12 software. Based on model selection
tests, the Common Effect Model (CEM) was selected as the optimal estimation
framework. Tax avoidance was measured using the Cash Effective Tax Rate (CETR)
proxy, profitability was evaluated through Return on Assets (ROA), and sales
growth was measured by the annual percentage change in total sales.
Four Key Findings from Data Analysis
From the econometric analysis conducted, the researchers identified four major takeaways regarding corporate tax behavior:
Profitability Has No Direct Effect on Tax Avoidance
Neither high nor low profitability (ROA) automatically drives a firm to pursue aggressive tax savings. With an average sample ROA of 11.05 percent, profit generation capability alone does not serve as a single determining factor in tax policy.
Sales Growth Encourages Tax Compliance
Sales growth demonstrated a statistically significant negative effect on tax avoidance. Companies experiencing rapid sales growth tend to be more compliant in paying taxes (reflected in a higher CETR) to preserve operational stability, maintain investor trust, and safeguard corporate reputation.
Company Size Strengthens the Effect of Profitability
Company size was proven to act as a moderating variable that strengthens the relationship between profitability and tax avoidance. Larger corporations possess greater financial resources, administrative infrastructure, and tax expertise, enabling them to optimize legal tax planning as profitability grows.
Company Size Weakens the Effect of Sales Growth
Conversely, company size weakens the impact of sales growth on tax
avoidance. When large enterprises experience surge in sales, they exercise
higher caution and refrain from aggressive tax planning strategies due to
intense scrutiny from auditors, investors, and the Directorate General of
Taxes.
Implications for Business and Public Policy
The insights from this research offer practical contributions to
financial accounting, public policy, and corporate strategy in Indonesia. For
business management, the findings emphasize the necessity of embedding tax
compliance into growth strategies and earnings management to avoid future legal
and regulatory risks.
For the government and tax authorities, the study indicates that tax
enforcement should not rely solely on gross revenue or net profit figures.
Structural firm characteristics, such as total asset scale and corporate size,
must be treated as critical indicators when assessing tax avoidance risks
across the manufacturing sector.
Author Profiles
- Siti
Halimahtussadiah, S.Ak.
Lead researcher and alumna of the Accounting Study Program, Faculty of
Economics and Business, Kesatuan Institute of Business and Informatics (IBIK),
Bogor. Her research focuses on financial accounting, corporate taxation, and
corporate performance evaluation.
- Richad Alamsyah,
M.Ak.
Lecturer and researcher in the Accounting Study Program at the Kesatuan
Institute of Business and Informatics (IBIK), Bogor. His expertise spans tax
accounting, corporate governance, and applied econometrics.
Research Reference
- Article Title:
Analysis of Profitability and Sales Growth on Tax Avoidance with
Company Size as a Moderating Variable
- Journal: International
Journal of Sustainable Social Science (IJSSS)
- Publication Year:
2026 (Vol. 4, No. 4, Pages 323–332)
- DOI / Official
Link: https://doi.org/10.59890/ijsss.v4i4.318
- https://aprmultitechpublisher.my.id/index.php/ijsss
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