Profitability as a Moderator of the Sustainability Disclosure-Tax Avoidance Relationship: Evidence from Indonesian Food and Beverage Manufacturing Firms, 2021-2024
DOI:
https://doi.org/10.61194/ijtc.v7i4.2505Keywords:
sustainability disclosure, tax avoidance, profitability, cash effective tax rate, legitimacy theoryAbstract
Introduction: Sustainability disclosure has become increasingly important as stakeholders expect companies to demonstrate accountability not only for their environmental and social impacts but also for responsible tax behavior. Nevertheless, recent studies continue to report inconsistent evidence on whether broader sustainability disclosure is associated with lower tax avoidance, particularly in emerging markets. This study examined the relationship between sustainability disclosure and tax avoidance and assessed whether profitability moderated that relationship among food and beverage manufacturing companies listed on the Indonesia Stock Exchange during 2021–2024. A quantitative design was employed using secondary data obtained from annual reports and sustainability reports, with 44 firm-year observations analyzed using linear regression and moderated regression analysis. The results showed that sustainability disclosure had a negative but statistically insignificant association with CuETR (B = −0.085, p = 0.185). The interaction between sustainability disclosure and profitability was also negative and statistically insignificant (B = −0.012, p = 0.600), indicating that profitability did not significantly moderate the relationship. These null findings should be interpreted cautiously because they are based on a small, sector-specific sample of 44 firm-year observations. The findings suggest that broader sustainability disclosure does not necessarily reflect lower tax avoidance and that profitability alone may be insufficient to strengthen the relationship between sustainability disclosure and corporate tax behavior.
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