The Influence of Anti-Corruption Practices, Internal Controls, and Profitability on Tax Avoidance in Indonesian Property and Real Estate Firms

Abstract

This study examines corporate tax avoidance in the Indonesian property and real estate industry, where tax-related practices may affect corporate governance and public revenue. Companies listed on the Indonesia Stock Exchange (IDX) between 2020 and 2024 are included in the empirical setting. With leverage included as a control factor, special attention is paid to three potential determinants of tax avoidance: profitability, internal control, and anti-corruption procedures. Quantitative data were obtained from annual and sustainability reports, resulting in 150 firm-year observations from 30 companies selected using predefined sampling criteria. Panel regression analysis was employed to examine the association between the explanatory variables and corporate tax avoidance. Tax avoidance is proxied by the Effective Tax Rate (ETR), calculated as income tax expense divided by pre-tax income, where a lower ETR indicates a higher level of tax avoidance. The results indicate that profitability is negatively associated with ETR, suggesting that more profitable companies tend to exhibit higher levels of tax avoidance. However, internal control and anti-corruption procedures are not statistically significantly associated with tax avoidance. Leverage, as a control variable, also shows no statistically significant association with tax avoidance. This study contributes to the literature by providing empirical evidence on the relative importance of financial and governance-related factors in explaining corporate tax avoidance in the Indonesian property and real estate sector.