Putu Novia Hapsari Ardianti, I Nyoman Kusuma Adnyana Mahaputra, Ida Ayu Made Adinda Yaswari

Interaction of profitability and capital intensity in determining corporate tax aggressiveness

Introduction

Interaction of profitability and capital intensity in determining corporate tax aggressiveness. Investigates how profitability and capital intensity affect corporate tax aggressiveness in Indonesian manufacturing firms (IDX). Profitability increases tax aggression, capital intensity reduces it. Insights for tax policy.

Abstract

Tax aggressiveness reflects a company's strategy to minimize tax obligations through tax planning. This study aims to examine the influence of liquidity, leverage, profitability, firm size, and capital intensity on tax aggressiveness in manufacturing companies listed on the Indonesia Stock Exchange (IDX) during the 2020-2022 period. Using purposive sampling, 72 companies were selected, resulting in 216 observational data points. The analysis method employed is multiple linear regression. The results show that profitability has a significant positive effect on tax aggressiveness, while capital intensity has a significant negative effect. These findings suggest that companies with higher profitability tend to be more aggressive in their tax planning, while those with higher capital intensity may adopt more conservative tax strategies. This study provides insights for policymakers to enhance the effectiveness of tax regulations and assists companies in understanding internal factors affecting their tax policies, offering guidance for future decision-making.

Review

This study addresses a highly relevant topic concerning corporate tax aggressiveness, a critical area for both corporate financial strategy and national fiscal policy, particularly in emerging markets like Indonesia. The investigation into a panel of manufacturing companies over a recent period (2020-2022) provides timely insights into corporate behavior amidst evolving economic landscapes. The findings, indicating a significant positive relationship between profitability and tax aggressiveness and a negative relationship with capital intensity, are interesting and contribute to the understanding of factors driving corporate tax strategies. The inclusion of several relevant control variables such as liquidity, leverage, and firm size also strengthens the analytical framework. However, a significant discrepancy exists between the study's title and its abstract. While the title explicitly suggests an "Interaction of profitability and capital intensity in determining corporate tax aggressiveness," the abstract only reports the individual, independent effects of profitability and capital intensity. There is no mention of whether an interaction term was included in the multiple linear regression model or, if it was, what its findings were. This omission is crucial, as the core contribution implied by the title is left unaddressed in the reported results. Furthermore, while the study employs purposive sampling, the abstract does not elaborate on the specific criteria, which could raise questions about potential sample selection bias. The results for the other independent variables (liquidity, leverage, firm size) are also not reported, leaving an incomplete picture of their influence. Despite these points, the study offers valuable insights for policymakers aiming to enhance tax regulations and for companies seeking to understand internal determinants of their tax policies. For future research, it is strongly recommended to explicitly test and report on the "interaction" effects promised by the title, which would significantly deepen the analysis. Expanding the sample size, incorporating alternative measures of tax aggressiveness, and exploring potential moderating or mediating factors could further enrich the findings. Additionally, providing a more detailed discussion of the theoretical underpinnings for each hypothesized relationship would strengthen the study's conceptual framework.

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