Profitability, sales growth, and solvency: Determinants of corporate tax avoidance

Abstract

Purpose: This study aims to determine the effect of profitability, sales growth, and solvency on tax avoidance.

Methods: This study uses a quantitative approach based on secondary data on primary consumer goods sector manufacturing companies listed on the IDX for the 2017-2019 period. The sample was selected purposively based on certain criteria. Data analysis was carried out through descriptive statistics, classical assumption tests, panel data regression, and hypothesis testing, with the help of Eviews software version 10.

Findings: The results of this study indicate that based on research conducted to analyze the effect of profitability, sales growth, and solvency on tax avoidance in primary consumer goods sector manufacturing companies located on the IDX for the 2017-2019 period, it can be concluded that profitability, sales growth, and solvency have a negative effect on tax avoidance.

Practical Implications: The results of this study provide important insights into the relationship between profitability, sales growth, and solvency with tax avoidance in manufacturing companies in the primary consumer goods sector listed on the Indonesia Stock Exchange. In this context, companies with high profitability and sales growth tend to avoid taxes, while high solvency encourages tax avoidance. These findings indicate the need for stricter supervision from the tax authorities to prevent tax avoidance practices. Furthermore, companies are advised to develop more ethical and transparent tax policies to maintain their reputation and social responsibility.