The Effect of Profitability and Leverage on Tax Avoidance (A Case Study on Consumer Non-Cyclicals Manufacturing Companies Listed on the Indonesia Stock Exchange Period 2021-2024)

Abstract

This study aims to empirically examine the effect of profitability and leverage on tax avoidance practices. The object of this research focuses on manufacturing companies included in the consumer non-cyclicals sector listed on the Indonesia Stock Exchange (IDX) during the 2021-2024 period. Sampling was conducted using the purposive sampling method, resulting in a final sample of 51 companies with a total of 204 observations. The method used for data analysis is panel data regression analysis with a Random Effect Model (REM) approach estimated using the Generalized Least Square (GLS) method via Eviews version 13 software. The measurement of independent variables relies on the Return On Assets (ROA) indicator for Profitability and the Debt to Equity Ratio (DER) for Leverage, while tax avoidance is measured using the Cash Effective Tax Rate (CETR). The results of hypothesis testing indicate that partially, profitability (ROA) has a positive effect on tax avoidance practices. On the other hand, leverage (DER) is proven to have no significant effect on tax avoidance practices