THE EFFECT OF RETURN ON ASSET, LEVERAGE, CAPITAL

INTENSITY AND CURRENT RATIO ON TAX AVOIDANCE

Yudha Yoga Pratama

Abstract

This research aims to determine the effect of return on assets,

leverage, capital intensity, and current ratio on tax avoidance in
mining companies listed on the Indonesia Stock Exchange for the
2020-2022 period. This research is causal research. The sample
in this research was obtained using a purposive sampling method,
through predetermined conditions. Based on this method, there
were 50 mining sector companies listed on the Indonesia Stock
Exchange for the 2020-2022 period. The analytical method used
is multiple linear regression analysis. The results of this research
are that return on assets has a positive effect on tax avoidance.
Meanwhile, leverage, capital intensity and current assets have no
effect on tax avoidance.

Keywords: Tax Avoidance, Returns On Assets, Leverage, Capital Intensity, and Current Ratio.

1. Introduction

Taxes have an important coercive nature of taxes and a

role in the country's economy. burden on taxpayers, the view
Tax is a source of state on taxes causes taxpayers to
income and is obtained always try to reduce the
through individual taxpayers amount of tax payable that
and corporate taxpayers, is must be paid off and in
coercive, and is collected achieving this ambition it is
based on applicable legal very vulnerable to fraud, such
regulations. Based on data as tax irregularities.
obtained from the Central
Statistics Agency, it appears The government and taxpayers have
that taxes make the largest different views on taxation. For the
contribution to the APBN, this government, taxes can be used as a source
proves that taxes are an of government financing and increasing tax
important part of the country, revenues. For taxpayers, taxes are a burden
so the government is trying to that can reduce income. For corporate
increase revenue from taxes. taxpayers, tax is a burden that can reduce
However, as a result of the profits in the company, so that both
individual taxpayers and corporate taxpayers companies tend to carry out tax avoidance to
make efforts to carry out tax avoidance. minimize the tax burden.
(Murkana & Putra, 2015)
Leverage is a representation of
According to PricewaterhouseCoopers company's ability to meet short-term and
(PwC), only 30% of the 40 Large Mining long-term debt or obligations. Leverage
Companies have adopted tax transparency reflects how much of the company's funding
reporting while for the rest, their tax reports comes from debt. The company can use this
are not yet transparent. debt to fulfill company operations or
investments. Companies that use debt will
Based on Tax Justice Network report, it incur additional costs on the loan or debt,
is explained that Indonesia experienced namely interest expenses. High corporate
losses of around IDR 68.7 trillion due to tax debt gives rise to high interest expenses.
avoidance. Losses amounting to IDR 68.7 Interest on loans is a deductible expense so
trillion occurred as a result of companies in it can cause taxable profits to decrease.
Indonesia being suspected of tax avoidance Reducing fiscal profits will reduce the
while the rest came from individual amount of tax payments. (Christili Tanjaya
taxpayers. This data explains that Indonesia & Nazmel Nazir, 2021).
is ranked fourth by The State of Tax Justice
after China, India and Japan in cases of Capital intensity is a representation of a
domestic tax avoidance. (Yeni Christian & company investing its assets in the form of
Poniman, 2023) fixed assets and inventory. This research
uses the capital intensity method with the
One case of tax avoidance is the case of fixed asset intensity ratio. The asset
PT. Adaro carries out Transfer Pricing with intensity ratio is the ratio between fixed
its subsidiary, namely Coal trade Services assets and total assets to calculate capital
International Pte, Ltd which is located in intensity. Capital intensity allows companies
Singapore. This is done by selling coal at to reduce tax costs through depreciation of
low prices to Coaltrade Services fixed assets. Depreciation can be deducted
International, then reselling it at high prices as a deductible expense when calculating a
to other countries. In addition, bonuses company's taxable profit (Delgado & KG
amounting to US$ 55 million were provided Mills, 2020).
by third parties and Adaro subsidiaries were
recorded by Coaltrade. The bookkeeping The current ratio is one part of the
carried out aims to minimize PT taxes. liquidity ratio. According to Kasmir (2016),
Adaro, because the tax rate in Singapore is the current ratio or current ratio is a ratio
17% lower than in Indonesia. (tribunsumbar, used to measure a company's ability to pay
2022). short-term obligations or debts that are due
when they are collected in full. If the
The measurement of tax avoidance in company has a high liquidity ratio, then the
this research is in accordance with Jamei company's finances are in good condition,
(2017) which uses the tax rate determined however, when the company's liquidity level
by the applicable regulations (Statutory Tax is low, the company's finances are not in
Rate). In Indonesia, according to Law good condition so the company tends to
Number 36 of 2008, the corporate income maintain its cash flow and has the potential
tax rate is 25% until 2019 and 22% for to take tax avoidance actions.
2020. The effective tax rate is a profit and
loss statement-based measurement used to Based on this background, research was
measure the effectiveness of tax deductions conducted on the effect of return on asset,
made by companies leading to high after-tax leverage, capital intensity, and current ratio
profits. The measurement of the effective on the potential of tax avoidance.
tax rate is by dividing the income tax burden
by profit before tax (Jamei, 2017).

Return On Asset is used to measure 2. Literature Review

company performance in using company
assets to generate profits. If the value of the Agency Theory
return on assets is high, then the company
generates high profits and the company will An agency relationship is an agreement
be subject to large amounts of tax, so through one or more people (as principals)
involving other people (as agents) to
perform several services on their behalf, This research uses the debt-to-equity
which involves some power in decision ratio as the unit of measurement, the DER
making over other people (as agents). formula is used because the lower the DER
ratio, the higher the company's ability to
Agency theory is a concept that fulfill all its obligations. The formula used
describes the relationship between principal is:
and agent. The principal contracts the agent
to work for the interests and goals of the
principal, so that the principal can give
decision authority to the agent to achieve
these goals.

In agency theory it is assumed that all Capital Intensity

individuals will act and act to improve their
The ratio used to measure capital
own benefit. Managers will act to improve
intensity in this research is fixed assets total
their own welfare by carrying out
assets, which reflects the proportion of fixed
opportunistic actions. This opportunistic
assets to total assets acquired by the
action is carried out by managers by
company. Therefore, the higher the capital
maximizing company profits in order to get
intensity, the greater the amount of
the maximum reward for their performance
depreciation expense, resulting in a lower
in running the company. The actions taken
tax burden. In this research, the following
by managers can lead to tax avoidance
formula was used:
practices.

Tax Avoidance

The measurement of tax avoidance in

this research is in accordance with Jamei Current Ratio
(2017) which uses the tax rate determined
by the applicable regulations (Statutory Tax In this research, liquidity is measured
Rate) minus the Effective Tax Rate (ETR), using the Current Ratio, this formula is used
as in the following formula: to see the company's ability to pay its short-
term debt. The higher the current ratio, the
stronger the company's financial position.
Tax Avoidance=Statutory Tax Rate ( STR )−EffectiveThe
Taxformula
Rate (used
ETRis) as follows:
Beban Pajak Penghasilan
Effective Tax Rate= Current Assets
Laba Sebelum Pajak Current Ratio=
Current Liability

Return On Asset Prior Research

The Measurement of return on assets in this Darsani & Sukartha (2021) researched
research uses a formula model for dividing net the influence of institutional ownership,
profit after tax and total assets. This formula is used profitability (ROA), leverage (DER), and
to see the company's performance because the capital intensity on tax avoidance. The
higher the ROA ratio, the better the company's research object was banking companies
performance in generating net profit. There is a listed on the IDX for the 2015-2019 period.
possibility that the company will take tax This research uses multiple linear regression
avoidance actions to minimize tax payments. The analysis. The research results show that
formula used is: profitability and capital intensity have a
positive effect on tax avoidance, while
leverage has no effect on tax avoidance.

Anasta (2021) researched the influence

of sales growth, profitability and capital
Leverage intensity on tax avoidance. The research
object is manufacturing companies in the
consumer goods and industrial sector listed previously explained, the hypothesis
on the Indonesia Stock Exchange for the proposed by the author in this research is as
2020-2022 period. This research uses panel follows:
data regression analysis. The results of this
research show that profitability and capital H1: Return on Assets has a positive
intensity have an effect on tax avoidance, effect on tax avoidance.
while sales growth has no effect on tax
avoidance. H2: Leverage has a negative effect on
tax avoidance
Jamaludin (2020) researched the
influence of profitability (ROA), leverage H3: Capital Intensity has a negative
(LTDER) and fixed asset intensity on tax effect on tax avoidance
avoidance. The research object is food and
beverage subsector companies listed on the H4: Current Ratio has a negative effect
IDX for the 2015-2017 period. This research on tax avoidance.
uses panel data regression analysis. The
research results show that profitability has a
negative and insignificant effect on tax
Population and Research Sample
avoidance, while leverage and fixed asset
intensity have no effect on tax avoidance. Sugiyono (2014) states that population is
a generalized area consisting of objects and
Widyastutia & Meutia (2022) researched
subjects that have certain qualities and
The Impact of Leverage, profitability,
characteristics that are determined to be
Capital Intensity, and Corporate Governance
studied and then conclusions drawn. The
on Tax Avoidance. The research object is
population in this research are mining
consumer goods manufacturing sub-sector
companies listed on the IDX in the 2020-
companies listed on the IDX for the 2015-
2022 research period
2019 period. This research uses a multiple
linear regression method. The research The sample is part or representative of
results show that Profitability, Leverage, the population to be studied. In this
Corporate Governance, and Capital Intensity research, the sample was selected using the
show a positive influence on tax avoidance. purposive sampling method, namely a
sample determination technique with certain
Dirman & Utami (2023) researched The
conditions. Purposive sampling is more
Role of Profitability, Company Size,
appropriate for researchers to use if research
Corporate Social Responsibility, and
requires provisions so that the samples taken
Inventory Intensity on Potential Tax
are in accordance with the research
Avoidance. The research object is
objectives to solve research problems and
companies registered on the IDX for the
can provide more representative values
2018-2022 period. This research uses linear
(Sugiyono, 2014). The criteria used to select
regression analysis. The research results
samples in this study were:
show that company size, corporate social
responsibility, and inventory intensity have  Mining companies listed on the
no influence on tax avoidance, while IDX in 2022
profitability influences tax avoidance.
 Mining companies that had IPO
Hypothesis during the research period.
 Mining companies that were active
Based on the problem formulation, during the research period.
theoretical studies, and framework

No. Kriteria Jumlah

Mining companies listed on the Indonesian Stock
1 54
Exchange in 2022
Mining companies that had just IPOed during the research
2 (4)
period.

3 Mining companies delisted from the IDX (0)

Total Sample 50
 Year of Research 3
Total Data 150

3. Results

Descriptive Statistical Analysis Test

Statistik Deskriptif
N Minimum Maximum Mean Std. Deviation
Tax Avoidance 150 -3.4527 6.3760 .055691 .7163649
ROA 150 -.7329 .7627 .052495 .1923489
Leverage 150 -7.5443 8.4535 .990242 1.9914959
Capital Intensity 150 .0000 .9069 .356928 .2812300
Current Ratio 150 .0126 14.1984 2.027119 2.1940756
Valid N (listwise) 150

From the data presented, it can be seen 1.9914959.

that the minimum tax avoidance value is -
3.4527 from Atlas Resources Tbk. For The minimum capital intensity value of
maximum tax avoidance results of 6.3760 0,000 from Energi Mega Persada Tbk. For
from Darma Henwa Tbk. The average value maximum capital intensity results of 0.9069
obtained from 150 samples shows a value of from Capitol Nusantara Indonesia Tbk. The
0.55691 with a standard deviation value of average results obtained from 150 samples
0.7163649. show a value of 0.356928 with a standard
deviation value of 0.2812300.
The minimum return on assets value is -
0.7329 from Ratu Prabu Energi Tbk. For the The minimum current ratio value is
maximum return on assets of 0.7627 from 0.0126 from Ratu Prabu Energi Tbk. For
Baramulti Suksessaran Tbk. The average maximum results, the current ratio is
results obtained from 150 samples show a 14.1984 from Perdana Karya Perkasa Tbk.
value of 0.052495 with a standard deviation The average results obtained from 150
value of 0.1923489. samples show a value of 2.027119 with a
standard deviation value of 2.1940756.
The minimum leverage value is -7.5443
from Ratu Prabu Energi Tbk. For maximum
leverage results of 8.4535 from Atlas Classic Assumption Test
Resources Tbk. The average results obtained Normality Test
from 150 samples show a value of 0.990242 From the results of the
with a standard deviation value of normality test that has been carried
out , as follows:
One-Sample Kolmogorov-Smirnov Test
 Unstandardize
d Residual
N 150
Normal Parametersa,b Mean .0000000
Std. Deviation .70807365
Most Extreme Differences Absolute .284
Positive .284
Negative -.216
Kolmogorov-Smirnov Z 3.893
Asymp. Sig. (2-tailed)c .000

Based on the data shown above, the outliers.

results show sig. which is not normal with a
value less than < 0.05 so that the researcher After carrying out the outlier test, 20
carries out an outlier test to find out data data were released so that the total sample
that is extremely deviant. The outlier test data in this study became 130 data from the
will produce data that is included in the previous 150 data.
One-Sample Kolmogorov-Smirnov Test
Unstandardized
Residual
N 130
a,b
Normal Parameters Mean 0
Std. Deviation .20420148
Most Extreme Differences Absolute .178
Positive .178
Negative -.116
Kolmogorov-Smirnov Z 1.329
Asymp. Sig. (2-tailed)c .068

The results of the normality test after Multicollinearity Test

carrying out the outlier test can be seen in
following table showing the sig value. of From the result of
0.068 and greater than 0.05 so the data can Multicollinearity Test that has been
be said to be normal. carried out, as follows:
Coefficientsa
Unstandardized Standardized
Coefficients Coefficients Collinearity Statistics
Model B Std. Error Beta t Sig. Tolerance VIF
1 (Constant) .142 .032 4.904 .000
ROA .488 .140 .292 3.484 .001 .854 1.071
Leverage .008 .006 .118 1.334 .184 .983 1.017
 Capital .068 .042 .027 1.295 .122 .828 1.008
Intensity
Current Ratio .015 .015 .089 1.016 .311 .937 1.067

Based on the results of the

multicollinearity test, the tolerance value
calculation shows a value > 0.10 and the
VIF value shows a value < 10. It can be
concluded that multicollinearity does not Heterocedasticity Test
occur.
From the result of heterocedasticity test
that has been carried out, as follows:

Coefficientsa
Standardized
Unstandardized Coefficients Coefficients
Model B Std. Error Beta t Sig.
1 (Constant) .143 .021 4.963 .000
ROA -.080 .093 -.083 1.273 .205
Leverage .017 .004 .153 .638 .325
Capital Intensity .091 .097 .026 1.400 .164
Current Ratio .009 .015 .092 .908 .306

Based on the results of the it can be concluded that heteroscedasticity

heteroscedasticity test, it shows that the sig. does not occur
for each independent variable the value is
greater than 0.05 so that there is no Autocorrelation Test
significant influence between variables with From the result of autocorrelation test
the absolute value of the residual variable so that has been carried out, as follows:
Runs Test
Unstandardized Residual
a
Test Value .00538
Cases < Test Value 62
Cases >= Test Value 63
Total Cases 130
Number of Runs 65
Z .475
Asymp. Sig. (2-tailed) .140
 Based on the results of the Determination Coefficient Test
autocorrelation test, the sig. value is greater
than 0.05 (0.140 > 0.05) so it can be The result of the determination
concluded that there is no autocorrelation. coefficient test that has been carried out, as
folllows:
Hypothesis Test

Model Summaryb
Adjusted R Std. Error of the
Model R R Square Square Estimate
a
1 .366 .230 .174 .2077724
a. Predictors: (Constant), Current Ratio, Leverage, ROA, Capital
Intensity
b. Dependent Variable: Penghindaran Pajak

Based on the results of the coefficient of explain variations in tax avoidance by 23%
determination test, the R Square value is and the other 77% is influenced by other
0.230 or 23%. This shows that ROA, variables not examined in this research.
leverage, capital intensity and current ratio

F Test

The result of the F test that has been carried out, as follows:
ANOVAa
Model Sum of Squares df Mean Square F Sig.
1 Regression 1.760 4 .440 4.854 .002b
Residual 74.704 125 .515
Total 76.464 129

Based on the F test results in table 4.8,

the comparison between Fcount and Ftable Ftable value of 2,440 and the sig value of
is shown as follows: 0.002 is smaller than 0.05. It can be
Df1 = 4 Ftable = 2.44 concluded that this model test is suitable for
Df2 = 130 – 4 = 126 use in research.

From this calculation it can be seen that T Test

the Fcount value of 4,854 is greater than the
The result of the T test that has been
carried out, as follows:
Coefficientsa
Standardized
Unstandardized Coefficients Coefficients
Model B Std. Error Beta t Sig.
1 (Constant) .101 .112 .904 .000
ROA .418 .331 .292 3.264 .002
Leverage .029 .030 .081 1.574 .332
Capital Intensity .068 .230 .027 1.295 .768
 Current Ratio .019 .028 .029 1.339 .735

Based on the results, sig. has a value of and the T value is 1.274 and is smaller than
0.002 and is smaller than 0.05 (significant) Ttable value of 1.65714, so capital intensity
and the T value is 3.264 and is greater than does not have a significant effect on tax
Ttable value of 1.65714, so that return on avoidance and H3 is rejected.
assets has a significant effect on tax
avoidance and H1 is accepted. Based on the results, sig has a value of
0.735 and is greater than 0.05 (not
Based on the result, sig has a value of significant) and the T value is 1.339 and is
0.332 and is greater than 0.05 (not smaller than Ttable value of 1.65714, so the
significant) and the T value is 1.574 and is current ratio does not have a significant
smaller than Ttable value of 1.65714, so effect on tax avoidance and H4 is rejected.
leverage does not have a significant effect
on tax avoidance and H2 is rejected. Multiple Regression Analysis Test

Based on the results, sig has a value of The result of the multiple analysis test
0.768 and greater than 0.05 (not significant) that has been carried out, as follows:

Coefficientsa
Standardized
Unstandardized Coefficients Coefficients
Model B Std. Error Beta t Sig.
1 (Constant) .101 .112 .904 .000
ROA .418 .331 .292 3.264 .002
Leverage .029 .030 .081 1.574 .332
Capital Intensity .068 .230 .027 1.295 .768
Current Ratio .009 .028 .029 1.339 .735

Based on the table of multiple linear regression test results, the regression equation is
obtained as follows:

TAV = 0.101α+ 0.418β1ROA + 0.029β2DER + 0.068β3CI + 0.009β4CR + e

4. Discussion
2) The effect of Leverage on tax avoidance
1) The effect of Return on Asset on tax avoidance
From the results of the tests that have been
From the results of the tests that have been carried out, it is known that leverage has no effect
carried out, it is known that return on assets has a on tax avoidance. It is known that the higher the
positive influence on tax avoidance. This shows leverage value, the higher the interest burden borne
that the higher the return on assets value, the higher by the company as a result of using funds through
the possibility of the company committing tax third or external parties. Companies can use debt to
avoidance. This occurs as a result of the profits meet operational costs and company stability, apart
generated by the company which are the basis for from that, company credibility is also an important
imposing income tax. The higher the company's value for creditors and companies in debt
profits, the higher the tax burden that the company agreements and low interest rates related to the
must pay and this will cause a decrease in company company's debt costs.
profits so that companies will try to avoid taxes to
reduce the tax burden. 3) The effect of Capital Intensity on tax avoidance
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