eCo-Fin

Vol.3, No.2, Juni 2021

Available online at: https://jurnal.kdi.or.id/index.php/ef

THE INFLUENCE OF PROFITABILITY, LEVERAGE AND COMPANY SIZE ON

TAX AGGRESSIVENESS
(Empirical Study on Manufacturing Companies in the Food and Beverage Sub-sector
and Cosmetics and Household Goods Sub-sector listed on the Indonesia Stock Exchange
in 2015-2017)
Yunia Oktari, S.E., M.Akt. 1),Benyamin Melatnebar, S.E., M.Akt. 2) Kito Kurniawan, S.E.,
M.M.3)
1)3)
Universitas Buddhidharma
Karawaci, Tangerang, Indonesia
1)yunia.oktari@ubd.ac.id
2)benyamin.melatnerbar@ubd.ac.id

3) kito.kurniawan@ubd.ac.id

Article history: Abstract

Received;
Revised;
This study aims to test the effect of profitability, leverage, and company size
Accepted; on tax aggressiveness. The population in this study are audited financial reports
Available online in food and beverage sub-sector manufacturing companies and the cosmetics
and household goods subsector listed on the Indonesia Stock Exchange (IDX)
Keywords: in 2015-2017.
Tax Aggressiveness The samples were determined by using purposive sampling. The number of
Profitability samples was 11 companies during the period of 3 years of observation so that
Leverage the total sample was 33. The data of this study used descriptive statistical tests,
Company Size classical assumption tests, multiple linear regression analysis tests, and
hypothesis testing.
The results of the study are as follows (1) Profitability has a significant effect
on tax aggressiveness. (2) Leverage has no significant effect on tax
aggressiveness. (3) Company size has a significant effect on tax aggressiveness.

I. INTRODUCTION
Tax aggressiveness is an action that aims to reduce the amount of the company's obligations in
terms of paying taxes and this action is a common action taken by large companies in order to
get high profits. Tax aggressiveness actions can harm the government because the company
does not pay taxes in accordance with the reality that occurs in the company's activities. The
act of tax aggressiveness is also an action that is not in line with the wishes of the community
because this method can harm the government in obtaining sources of state revenue that is used
for the welfare of the community (Dewi and Wirawati 2017, 1950).

Leverage is a ratio that indicates the amount of external capital used by the company to carry
out its operating activities. The results of the calculation of the leverage ratio indicate how
much the company's assets come from the company's borrowed capital. If the company has a
high source of borrowing funds, having an interest expense will reduce profits, so that with
reduced profits it reduces the tax burden in the current period. Companies can use the level of
leverage to reduce profits so that the tax burden is reduced (Adisamartha and Noviari 2015,
977).

ISSN 2656-095X (online) 2656-0941 (print) © The Authors. Published by Komunitas Dosen Indonesia.
doi: https://doi.org/10.32877/ef.v1i1.52
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eCo-Fin, 2021, 3 (2), 56

II. BOOK REVIEW AND PERFORMANCE OF AUTHORITY

Based on the background of the problem above, the formulation of the problem in this study
is as follows:
1. Does profitability have a significant effect on tax aggressiveness?
2. Does leverage have a significant effect on tax aggressiveness?
3. Does the size of the company have a significant effect on tax aggressiveness?
4. Do profitability, leverage, firm size have a simultaneous effect on tax aggressiveness?

A. RESEARCH OBJECTIVES
The aims of this research are as follows:
1. To determine the effect of profitability on tax aggressiveness.
2. To determine the effect of leverage on tax aggressiveness.
3. To determine the effect of company size on tax aggressiveness.
4. To determine the effect of profitability, leverage, firm size simultaneously on tax
aggressiveness.

B. BENEFITS OF RESEARCH
The benefits of this research are as follows:
1. Theoretical
This research is expected to be used as a reference in the development of economics,
especially in the field of accounting. In addition, this research is expected to be used as
literature and generate new ideas and ideas for further research in relation to profitability and
company size to tax aggressiveness.
2. Reader
This research is expected to provide information and can be used as a reference by several
parties related to decisions or policies to be taken. This research can provide a view for
companies regarding tax aggressiveness actions in order to avoid these actions and not be
subject to tax sanctions. For investors, this research can be used as a view of how company
management takes policies related to taxation. As for the Directorate General of Taxes, this
research can be used as a view in making taxation policies in the future.

A. STAGES OF RESEARCH
The stages in this research are as follows
1. Stage 1
Observing research objects, literature, primary or secondary data collectivities.
2. Stage 2
Conducting data processing, presenting research results, concluding research results and
suggestions or providing solutions to the research carried out.
3. Stage 3
Making research reports and scientific publications.

B. RESEARCH METHOD

The type of data used in this study is quantitative data, namely data in the form of numbers
and can be measured and tested by statistical methods. While the data sources used are
secondary data obtained from annual reports and financial statements of non-financial
companies listed on the IDX from 2015 to 2017.
In this study, the object of research is the financial statements of manufacturing companies
listed on the Indonesia Stock Exchange in the Food and Beverage sub-sector and the Cosmetics
and Household Goods sub-sector listed on the Indonesia Stock Exchange in 2015-2017. The
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eCo-Fin, 2021, 3 (2), 56

factors tested for their influence on ETR consist of 3 independent variables, namely
Profitability (ROA), Leverage (DER), and Company Size (SIZE).
Data are empirical facts collected by researchers for the purpose of solving problems or
answering research questions. Research data can come from various sources that are collected
using various techniques during research activities.
In this study, the population taken is the food and beverage sub-sector manufacturing
companies and the cosmetics and household goods sub-sector listed on the Indonesia Stock
Exchange during the 2015-2017 period, namely 11 companies.

1. Research Object
a. Independent Variable
The independent variables presented in this study consist of:
1) Profitability
Profitability describes the company's ability to generate profits or profits for the company
from the total assets owned. This study uses ROA as a proxy for measuring company
profitability. Profitability can be measured by the following formula :

Laba Bersih Setelah Pajak

𝑅𝑂𝐴 = X 100%
𝑇𝑜𝑡𝑎𝑙 𝐴𝑠𝑒𝑡
1) Leverage
Leverage is the ratio used to assess debt to equity. This ratio is sought by comparing all debt,
including current debt with all equity. This ratio is useful for knowing the amount of funds
provided by the borrower with the owner of the company. In other words, this ratio serves to
determine each rupiah itself that is used as a debt guarantee (Kasmir 2012, 157-158).
Total 𝐿𝑖𝑎𝑏𝑖𝑙𝑖𝑡𝑖𝑒𝑠
𝐷𝐸𝑅 =
Total 𝐸𝑞𝑢𝑖𝑡𝑦

2) Company Size
Company size is one of the characteristics of the company which is an estimator variable and
is widely used to explain variations in disclosure in the company's annual report. Company size
describes how much assets the company owns.
𝑆𝑖𝑧𝑒 = 𝐿𝑛 ( 𝑇𝑜𝑡𝑎𝑙 𝐴𝑠𝑒𝑡 )
b. Dependent Variable
The dependent variable is a variable whose value is influenced by the independent variable.
The dependent variable used in this study is tax aggressiveness. Corporate tax aggressiveness
is an act of engineering taxable income that is planned through tax planning actions using both
legal (tax avoidance) and illegal (tax evasion) methods. ETR is the ratio of net tax expense
(Total Tax Expense) to the company's profit before income tax (pretax income), which is
obtained in the company's income statement for the current year. Where ETR is low, the tax
aggressiveness is high, whereas if ETR

III. RESULTS AND DISCUSSION

A. DISCUSSION
1. Agency Theory
Agency theory explains the relationship between the authorizing party (principle) and the
authorized party (agent) (Nugraha 2015, 21) states that in agency or agency theory there is a
contract or agreement between resource owners and managers to manage the company and
achieve goals The main goal of the company is to maximize the profits to be obtained, so that
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eCo-Fin, 2021, 3 (2), 56

sometimes managers do various ways to achieve these goals, either in a good way or in ways
that harm many parties.
2. Tax Aggressiveness
According to (Kuriah and Asyik 2016, tax aggressiveness is defined as a tax planning activity
for all companies involved in efforts to reduce the effective tax rate. Tax Planning, is the
process of controlling actions to avoid the consequences of imposing unwanted taxes. Tax
Planning or the cool term tax planning is defined as a method or way to plan taxes so that the
obligation to pay taxes to the state becomes smaller (Melatnebar, Benjamin 2019)
3. Profitability
Profitability is the company's ability to earn profits. According to (Nugraha 2015, 30)
profitability is a performance indicator carried out by management in managing company
assets as indicated by the profits generated.
4. Leverage
Leverage is a financial ratio that describes the relationship between the company's debt to
the company's capital and assets. The leverage ratio describes the source of operating funds
used by the company. The leverage ratio also shows the risks faced by the company. This ratio
can see the extent to which the company is financed by debt or external parties with the
company's ability described by capital (Agusti 2014, 6).
5. Company Size
According to (Gemilang 2017, 25) defines company size as a scale or value that can classify
a company into large or small categories based on total assets, log size, and so on. The greater
the total assets, the greater the size of the company. The larger the size of the company, the
more complex the transactions will be. So it allows companies to take advantage of existing
loopholes to take tax avoidance actions from each transaction.
6. Research Model Framework
The framework of this research model is as follows:
Figure 1
Research Model

7. Research Hypothesis
Profitability Against Tax Aggressiveness
Profitability is the company's ability to generate profits from the activities carried out by the
company. The income earned by the company tends to be directly proportional to the tax paid,
so the greater the profit earned by the company, the higher the tax burden that must be borne
by the company.
Every company wants to maximize the profit earned. However, the company is also obliged
to pay taxes. In accordance with the previous theory which states that the greater the
profitability, the greater the ETR, it can be concluded that the greater the profitability obtained
by the company, the company will take tax aggressiveness actions because companies that have
large profitability will be seen in the financial statements and of course have a higher tax
burden. more that must be paid (Nugraha 2015, 52). Based on this description, the hypotheses
proposed in this study are as follows:
H1: Profitability has no significant effect on corporate tax aggressiveness.

Leverage Against Tax Aggressiveness

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eCo-Fin, 2021, 3 (2), 56

The leverage ratio describes the company's condition in fulfilling its long-term obligations.
The funding system within the company can lead to conflicts between principals and agents.
There is a possibility that the principal does not approve of additional funding for the company's
activities, so that the agent requires other funding to cover the lack of funds. One way is to
make loans or debts (Nugraha 2015, 52).
Companies with a high level of leverage have high tax aggressiveness in the company
because the expenditure of interest expense will reduce the tax burden that will be incurred by
the company, so the company can utilize more funding through debt to be able to generate tax
incentives and avoid paying high taxes. Based on this description, the hypotheses proposed in
this study are as follows:
H2: Leverage has a significant effect on tax aggressiveness.

Company Size Against Tax Aggressiveness

Company size can be interpreted as a scale where companies are classified as large or small
from various points of view, one of which is judged by the size of the assets owned by the
company. The size of the company can determine the size of the assets owned by the company,
the larger the assets owned is expected to increase the productivity of the company. Increased
productivity will result in greater profits and of course affect the amount of taxes that must be
paid by the company.
Based on the explanation and theory from previous research which states that the larger the
size of the company, the smaller the ETR, it can be concluded that the larger the size of the
company, the company can take tax aggressiveness actions because the smaller the ETR is due
to the small tax burden paid compared to the profit before taxes paid. obtained by the company.
Tax aggressiveness can occur because large companies have greater space for tax planning
with the aim of reducing ETR, according to research (Gemilang 2017, 37). From this
explanation, the following hypothesis is proposed in this study:
H3: Firm size has a significant effect on tax aggressiveness.

Profitability, Leverage, Company Size Against Tax Aggressiveness

From the description that has been described previously, the three independent variables are
thought to have an effect on tax aggressiveness. Then the data is also suspected that if these
variables are tested together on the dependent variable, the results will have an effect. So it can
be concluded that the influence of leverage, profitability and firm size can affect tax
aggressiveness.
H4: Profitability, Leverage, and Firm Size have a simultaneous effect on tax aggressiveness.

A. Description of Research Result Data

This study uses a sample of companies from the food and beverage sub-sector and the
cosmetics and household goods sub-sector listed on the IDX in 2015-2017. By reconciling the
sample, there are 11 companies that can be sampled in this study.

Based on the sample selection process, it can be concluded as follows:

a. Companies that are not listed or delisted on the IDX during the research period are PT.
Davomas Abadi Tbk (DAVO).
b. Companies that do not present complete financial statements and are published on the IDX
are PT. Tiga Pilar Sejahtera Food Tbk (AISA), PT. Siantar Top Tbk (STTP), PT. Kino
Indonesia Tbk (KINO), and PT. Unilever Indonesia Tbk (UNVR).
c. Companies experiencing data outliers are PT. Akasha Wira Internasional (ADES). Outliers
are data that appear to have unique characteristics that look very much different from other
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eCo-Fin, 2021, 3 (2), 56

observations and appear in the form of extreme values for either a single variable or a
combination variable.
d. Companies that experienced losses in the research period, namely PT. Tri Banyan Tirta
Tbk (ALTO), PT. Prasidha Aneka Niaga Tbk (PSDN), PT. Martina Berto Tbk (MBTO), and
PT. Mustika Ratu Tbk (MRAT).

IV. Conclusions and Suggestions

A. Conclusion
This study aims to obtain empirical evidence regarding the effect of profitability, leverage,
and firm size on tax aggressiveness. The sample data used are 11 manufacturing companies in
the food and beverage sub-sector and the cosmetics and household appliances sub-sector listed
on the Indonesia Stock Exchange in 2015-2017.
Based on the results of the analysis and discussion described in the previous chapter, the
following conclusions can be drawn:
1. Profitability proxied by ROA is proven to have a significant effect on tax aggressiveness
with a significant value of 0.001.
2. Leverage as proxied by DER does not have a significant effect on tax aggressiveness with
a significant value of 0.275.
3. The size of the company as proxied by LN is proven to have a significant effect on tax
aggressiveness with a significant value of 0.000.
4. Profitability, Leverage, and Firm Size have a significant effect on tax aggressiveness.
As the end of the discussion of this research, the author tries to draw conclusions. Based on
the results of observations and literature as well as the discussion that the author has put
forward, it can be concluded that:
(1) Profitability has a significant effect on tax aggressiveness.
(2) Leverage has no significant effect on tax aggressiveness.
(3) Company size has a significant effect on tax aggressiveness.
B. Suggestion
Some suggestions that can be given based on the discussion and conclusions of this study are
as follows:
1. For Academics
Based on the limitations stated above, the following are suggestions for further researchers:
a. Further research is suggested to use other sector companies, such as manufacturing
companies listed on the IDX so that the research results can be more generalized.
b. Further research should extend the research period, for example 5 years.
c. Future research is expected to add or use other independent variables that can detect
corporate tax avoidance activities such as audit committees, independent commissioners and
institutional ownership.
2. Share Managerial Policy
In tax policy making organizations, it is expected that they can be used as views in making
future tax policies for business entities in Indonesia.
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Sumber lain:
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www.pajak.go.id