Analysis of the Effect of Variables on Tax Avoidance

Oct 13, 2025 by talynt.org 40 views

Effect of Economic Value Added, Return on Assets (ROA), Return on Equity (ROE), Inventory Intensity and Capital Intensity on Tax Avoidance: Case Study of Automotive Companies on the Indonesia Stock Exchange (2016-2020)

Introduction

In the business world, tax avoidance is a topic that attracts attention, especially among companies listed on the Indonesia Stock Exchange. Tax avoidance is a complex issue that involves the use of various strategies to minimize tax liabilities. Companies that engage in tax avoidance may face reputational risks, fines, and penalties. However, some companies may view tax avoidance as a legitimate way to improve their financial performance and increase their competitiveness. This study aims to reveal the effect of economic value added (EVA), return on assets (ROA), return on equity (ROE), inventory intensity, and capital intensity on tax avoidance, with a focus on companies in the automotive industry sector and its components during the 2016-2020 period.

Methodology

This study uses a quantitative approach, with a focus on audited financial statements from 12 registered automotive companies listed on the Indonesia Stock Exchange. The data was collected from the companies' annual reports and financial statements for the period 2016-2020. The study uses panel data regression analysis to examine the relationship between the variables under study and tax avoidance.

Analysis of the Effect of Variables on Tax Avoidance

Economic Value Added (EVA)

The results of this study show that economic value added has a significant positive influence on tax avoidance. This suggests that companies that are able to create economic value are more likely to engage in tax avoidance strategies to improve their financial performance. Companies that are able to generate high EVA may view tax avoidance as a way to increase their net profit and improve their competitiveness.

Return on Assets (ROA)

Conversely, return on assets shows a significant negative effect on tax avoidance. This can be interpreted that companies with more efficient assets tend to be more transparent in their tax reporting. In this case, good management in utilizing assets encourages companies to operate more obediently to tax obligations, thereby reducing tax avoidance.

Return on Equity (ROE)

Return on equity is found to have a significant positive influence on tax avoidance. This indicates that companies that have a high level of equity return tend to utilize legal gaps in tax regulations to reduce their tax obligations. This strategy can be a way to increase net profit, although the risk of reputation needs to be considered.

Inventory Intensity

From this study, it was found that the inventory intensity had a positive but not significant effect on tax avoidance. Although the company may try to manage its inventory well for cost efficiency purposes, direct effect on tax avoidance is not as strong as other variables under study.

Capital Intensity

Finally, capital intensity has a negative and insignificant influence on tax avoidance. This shows that companies that have a higher capital proportion do not always look for ways to avoid taxes. Conversely, they may be more focused on developing infrastructure and production capacity, which in turn affects the overall cost and tax obligations.

Conclusion

Overall, this study concluded that economic value added, return on assets, return on equity, inventory intensity, and capital intensity simultaneously affect tax avoidance in automotive companies listed on the Indonesia Stock Exchange during the 2016-2020 period. This shows the importance of good financial management and careful strategies in tax planning to achieve sustainable business goals.

Implications of the Study

The findings of this study have several implications for companies in the automotive sector. Firstly, companies that are able to create economic value are more likely to engage in tax avoidance strategies. Secondly, companies with more efficient assets tend to be more transparent in their tax reporting. Thirdly, companies that have a high level of equity return tend to utilize legal gaps in tax regulations to reduce their tax obligations. Finally, companies that have a higher capital proportion do not always look for ways to avoid taxes.

Recommendations

Based on the findings of this study, several recommendations can be made. Firstly, companies in the automotive sector should focus on creating economic value to improve their financial performance. Secondly, companies should ensure that they have good management in utilizing assets to reduce tax avoidance. Thirdly, companies should be aware of the risks associated with tax avoidance and ensure that they comply with tax regulations. Finally, companies should consider developing strategies to improve their financial performance without engaging in tax avoidance.

Limitations of the Study

This study has several limitations. Firstly, the study only focuses on companies in the automotive sector and its components listed on the Indonesia Stock Exchange. Secondly, the study only examines the relationship between economic value added, return on assets, return on equity, inventory intensity, and capital intensity and tax avoidance. Thirdly, the study only uses audited financial statements from 12 registered automotive companies. Finally, the study only examines the relationship between the variables under study and tax avoidance during the 2016-2020 period.

Future Research Directions

Several future research directions can be identified. Firstly, future studies can examine the relationship between other variables and tax avoidance in the automotive sector. Secondly, future studies can examine the relationship between economic value added, return on assets, return on equity, inventory intensity, and capital intensity and tax avoidance in other industries. Thirdly, future studies can examine the relationship between tax avoidance and company performance in the automotive sector. Finally, future studies can examine the relationship between tax avoidance and company reputation in the automotive sector.

Conclusion

In conclusion, this study reveals the effect of economic value added, return on assets, return on equity, inventory intensity, and capital intensity on tax avoidance in automotive companies listed on the Indonesia Stock Exchange during the 2016-2020 period. The findings of this study have several implications for companies in the automotive sector and highlight the importance of good financial management and careful strategies in tax planning to achieve sustainable business goals.
Q&A: Effect of Economic Value Added, Return on Assets (ROA), Return on Equity (ROE), Inventory Intensity and Capital Intensity on Tax Avoidance

Q: What is tax avoidance and why is it a topic of interest in the business world?

A: Tax avoidance refers to the use of various strategies to minimize tax liabilities. It is a topic of interest in the business world because companies that engage in tax avoidance may face reputational risks, fines, and penalties. However, some companies may view tax avoidance as a legitimate way to improve their financial performance and increase their competitiveness.

Q: What is the main objective of this study?

A: The main objective of this study is to reveal the effect of economic value added (EVA), return on assets (ROA), return on equity (ROE), inventory intensity, and capital intensity on tax avoidance, with a focus on companies in the automotive industry sector and its components during the 2016-2020 period.

Q: What are the key findings of this study?

A: The key findings of this study are:

Economic value added has a significant positive influence on tax avoidance.
Return on assets shows a significant negative effect on tax avoidance.
Return on equity is found to have a significant positive influence on tax avoidance.
Inventory intensity has a positive but not significant effect on tax avoidance.
Capital intensity has a negative and insignificant influence on tax avoidance.

Q: What are the implications of this study for companies in the automotive sector?

A: The findings of this study have several implications for companies in the automotive sector. Firstly, companies that are able to create economic value are more likely to engage in tax avoidance strategies. Secondly, companies with more efficient assets tend to be more transparent in their tax reporting. Thirdly, companies that have a high level of equity return tend to utilize legal gaps in tax regulations to reduce their tax obligations. Finally, companies that have a higher capital proportion do not always look for ways to avoid taxes.

Q: What are the recommendations of this study for companies in the automotive sector?

A: Based on the findings of this study, several recommendations can be made. Firstly, companies in the automotive sector should focus on creating economic value to improve their financial performance. Secondly, companies should ensure that they have good management in utilizing assets to reduce tax avoidance. Thirdly, companies should be aware of the risks associated with tax avoidance and ensure that they comply with tax regulations. Finally, companies should consider developing strategies to improve their financial performance without engaging in tax avoidance.

Q: What are the limitations of this study?

A: This study has several limitations. Firstly, the study only focuses on companies in the automotive sector and its components listed on the Indonesia Stock Exchange. Secondly, the study only examines the relationship between economic value added, return on assets, return on equity, inventory intensity, and capital intensity and tax avoidance. Thirdly, the study only uses audited financial statements from 12 registered automotive companies. Finally, the study only examines the relationship between the variables under study and tax avoidance during the 2016-2020 period.

Q: What are the future research directions of this study?

A: Several future research directions can be identified. Firstly, future studies can examine the relationship between other variables and tax avoidance in the automotive sector. Secondly, future studies can examine the relationship between economic value added, return on assets, return on equity, inventory intensity, and capital intensity and tax avoidance in other industries. Thirdly, future studies can examine the relationship between tax avoidance and company performance in the automotive sector. Finally, future studies can examine the relationship between tax avoidance and company reputation in the automotive sector.

Q: What are the practical implications of this study for tax authorities and policymakers?

A: The findings of this study have several practical implications for tax authorities and policymakers. Firstly, tax authorities should be aware of the strategies used by companies to avoid taxes and take steps to prevent tax avoidance. Secondly, policymakers should consider revising tax laws and regulations to prevent tax avoidance and ensure that companies comply with tax obligations. Finally, tax authorities and policymakers should work together to develop strategies to prevent tax avoidance and ensure that companies pay their fair share of taxes.

Q: What are the future implications of this study for the automotive sector?

A: The findings of this study have several future implications for the automotive sector. Firstly, companies in the automotive sector should focus on creating economic value to improve their financial performance. Secondly, companies should ensure that they have good management in utilizing assets to reduce tax avoidance. Thirdly, companies should be aware of the risks associated with tax avoidance and ensure that they comply with tax regulations. Finally, companies should consider developing strategies to improve their financial performance without engaging in tax avoidance.