The Effect of Capital Intensity and Profitability on Tax Avoidance
Purpose: This study aims to examine the effect of capital intensity and profitability on tax avoidance in transportation companies listed on the Indonesia Stock Exchange (IDX).
Methodology: This study employed a quantitative approach using secondary data from annual reports of 36 transportation companies during 2020–2024, resulting in 180 firm-year observations. Tax avoidance was measured using the Cash Effective Tax Rate (CETR), capital intensity using the fixed asset ratio, and profitability using Return on Assets (ROA). Data were analyzed using multiple linear regression.
Results: The results show that capital intensity has a negative but insignificant effect on tax avoidance (β=-0.653; p=0.170). Profitability also has a negative and insignificant effect on tax avoidance (β=-0.008; p=0.993). These findings indicate that asset investment and profitability do not significantly determine corporate tax avoidance behavior.
Conclusions: Transportation companies primarily utilize fixed assets for operational purposes rather than tax reduction strategies, while higher profitability does not necessarily encourage tax avoidance practices.
Limitations: This study is limited to transportation companies and only examines two financial determinants of tax avoidance.
Contribution: This study contributes to corporate taxation literature by providing empirical evidence on the role of financial characteristics in explaining tax avoidance behavior.