Companies should prioritize building an ethical and sustainable tax strategy

Oct 13, 2025 by vinooalluri.com 74 views

Factors that Influence Tax Avoidance in Mining Companies Listed on the IDX: A Study on Business Strategies, Profitability, and Leverage

Introduction

Tax avoidance has become a widespread phenomenon in Indonesia, particularly in the mining sector. The Indonesian government has implemented various regulations to combat tax evasion, but companies continue to find ways to minimize their tax liabilities. This study aims to analyze the effect of business strategies, profitability, and leverage on tax avoidance in mining companies listed on the Indonesia Stock Exchange (IDX). The research focuses on the period from 2014 to 2016, using a quantitative design and multiple linear regression analysis.

Background

Tax avoidance is a complex issue that involves the use of various strategies to minimize tax liabilities. Companies may use tax avoidance techniques to reduce their tax burden, but these practices can be subject to strict regulations and penalties. In Indonesia, the mining sector is particularly vulnerable to tax avoidance due to its high regulatory requirements and tax rates. The Indonesian government has implemented various measures to combat tax evasion, including the introduction of a new tax law in 2016.

Research Methodology

This study uses a quantitative design, collecting secondary data from mining companies listed on the IDX for the period from 2014 to 2016. The data were collected using a purposive sampling technique, resulting in a sample of 34 companies. The analysis was conducted using multiple linear regression, with tax avoidance as the dependent variable and business strategies, profitability, and leverage as the independent variables. Company size was used as a control variable.

Research Findings

The results of the analysis show that business strategies, profitability, and leverage have a significant influence on tax avoidance in mining companies listed on the IDX during the study period. In more detail, business strategies and profitability have a positive and significant effect on partial tax avoidance. This suggests that companies with good business strategies and high profitability levels tend to be more active in tax avoidance.

However, leverage as one of the independent factors does not show a significant effect on tax avoidance. This may be due to the fact that companies with high debt may focus more on fulfilling debt and interest payment obligations rather than finding ways to avoid taxes. In this case, the company prefers to strengthen its financial position rather than taking legal risks that may arise from the practice of tax avoidance.

In addition, company size as a control variable is also found to have a positive and significant influence on tax avoidance. Larger companies usually have better resources and broader access to tax advisors and complex tax avoidance strategies. This illustrates that large companies have more potential to be involved in tax avoidance compared to small companies.

Discussion

Tax avoidance is a practice that is difficult to avoid in the business world, especially in industries that face a lot of high regulations and taxes such as mining. Based on research findings, company managers need to pay attention to their business strategies and profitability to minimize taxation risk. Although tax avoidance can provide short-term benefits in terms of cash flow, this practice must be done carefully. Violating tax law can be fatal, including large fines and damage to the company's reputation.

It is essential for companies to balance the benefits of tax avoidance with social responsibility and legal compliance. Considering the increasingly tight tax regulation and public demands on transparency, companies need to build an ethical and sustainable tax strategy. In this case, clear and open communication with stakeholders will be the key in creating trust and mitigating risks related to tax avoidance.

Conclusion

This research confirms that business strategies and profitability have a significant impact on tax avoidance in the mining sector, while company size also plays an important role as a determining factor in this practice. As a next step, further research in this field can help understand the dynamics of tax avoidance in a broader economic context.

Recommendations

Based on the research findings, the following recommendations are made:

Companies should prioritize building an ethical and sustainable tax strategy. This involves balancing the benefits of tax avoidance with social responsibility and legal compliance.
Clear and open communication with stakeholders is essential. This will help create trust and mitigate risks related to tax avoidance.
Company managers should pay attention to their business strategies and profitability. This will help minimize taxation risk and ensure compliance with tax laws.
Further research is needed to understand the dynamics of tax avoidance in a broader economic context. This will help policymakers and business leaders develop effective strategies to combat tax evasion.

Limitations of the Study

This study has several limitations, including:

The sample size is relatively small. The study only collected data from 34 companies, which may not be representative of the entire mining sector.
The study only focuses on the period from 2014 to 2016. Further research is needed to understand the dynamics of tax avoidance in a broader economic context.
The study only examines the effect of business strategies, profitability, and leverage on tax avoidance. Further research is needed to examine the effect of other factors, such as corporate governance and industry characteristics.

Future Research Directions

Future research should focus on the following areas:

Examining the effect of other factors on tax avoidance. This includes corporate governance, industry characteristics, and other factors that may influence tax avoidance.
Understanding the dynamics of tax avoidance in a broader economic context. This includes examining the impact of tax avoidance on the economy and society as a whole.
Developing effective strategies to combat tax evasion. This includes developing policies and regulations that can help prevent tax evasion and ensure compliance with tax laws.
Q&A: Factors that Influence Tax Avoidance in Mining Companies Listed on the IDX

Introduction

Tax avoidance has become a widespread phenomenon in Indonesia, particularly in the mining sector. In this article, we will answer some of the most frequently asked questions about tax avoidance in mining companies listed on the IDX.

Q: What is tax avoidance?

A: Tax avoidance is the practice of using various strategies to minimize tax liabilities. Companies may use tax avoidance techniques to reduce their tax burden, but these practices can be subject to strict regulations and penalties.

Q: Why do companies engage in tax avoidance?

A: Companies engage in tax avoidance to reduce their tax burden and increase their cash flow. Tax avoidance can provide short-term benefits, but it must be done carefully to avoid violating tax laws.

Q: What are the factors that influence tax avoidance in mining companies listed on the IDX?

A: The factors that influence tax avoidance in mining companies listed on the IDX include business strategies, profitability, and leverage. Company size is also an important factor, as larger companies have better resources and broader access to tax advisors and complex tax avoidance strategies.

Q: How do business strategies influence tax avoidance?

A: Business strategies can influence tax avoidance by providing companies with the ability to minimize their tax liabilities. Companies with good business strategies and high profitability levels tend to be more active in tax avoidance.

Q: How does profitability influence tax avoidance?

A: Profitability is a key factor in tax avoidance, as companies with high profitability levels tend to be more active in tax avoidance. Companies with high profitability levels have more resources to devote to tax avoidance strategies.

Q: How does leverage influence tax avoidance?

A: Leverage does not have a significant effect on tax avoidance. Companies with high debt may focus more on fulfilling debt and interest payment obligations rather than finding ways to avoid taxes.

Q: What is the role of company size in tax avoidance?

A: Company size is an important factor in tax avoidance, as larger companies have better resources and broader access to tax advisors and complex tax avoidance strategies. Larger companies have more potential to be involved in tax avoidance compared to small companies.

Q: What are the risks associated with tax avoidance?

A: The risks associated with tax avoidance include violating tax laws, which can result in large fines and damage to the company's reputation. Companies must balance the benefits of tax avoidance with social responsibility and legal compliance.

Q: How can companies balance the benefits of tax avoidance with social responsibility and legal compliance?

A: Companies can balance the benefits of tax avoidance with social responsibility and legal compliance by building an ethical and sustainable tax strategy. This involves clear and open communication with stakeholders and prioritizing compliance with tax laws.

Q: What are the implications of tax avoidance for the economy and society?

A: Tax avoidance can have significant implications for the economy and society, including reducing government revenue and increasing the tax burden on other taxpayers. Companies must consider the broader implications of tax avoidance and ensure that their practices are compliant with tax laws.

Conclusion

Tax avoidance is a complex issue that involves the use of various strategies to minimize tax liabilities. Companies must balance the benefits of tax avoidance with social responsibility and legal compliance. By understanding the factors that influence tax avoidance and the risks associated with it, companies can develop effective strategies to minimize their tax liabilities while ensuring compliance with tax laws.