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THE EFFECT OF SALES GROWTH AND FIXED ASSET INTENSITY ON TAX

AVOIDANCE MODERATED BY INSTITUTIONAL OWNERSHIP

Stefanie Martchellia Suteja

Faculty of Economics, Tarumanagara University, Jakarta, Indonesia

stefanie.suteja@gmail.com

ABSTRACT

The purpose of the study is to obtain knowledge about the effect of sales growth and fixed asset intensity

on tax avoidance and see the role of institutional ownership in strengthening or weakening the two

independent variables on tax avoidance as the dependent variable in this study. The data used in this

study is secondary data derived from the financial statements of manufacturing companies listed on the

Indonesia Stock Exchange (IDX) in 2018-2020. The method used in this study is a qualitative approach

method, with samples in this study selected using the purposive sampling method. The results showed

that institutional ownership was unable to weaken the effect of sales growth on tax avoidance, so the

third hypothesis was rejected. In addition, institutional ownership is also unable to weaken the effect of

fixed asset intensity on tax avoidance, so the fourth hypothesis is also rejected. Overall, the study

concluded that sales growth did not have a significant effect on tax avoidance, while fixed asset intensity

had a significant effect only on non-conforming tax. In addition, institutional ownership is unable to

moderate the effect of sales growth and fixed asset intensity on tax avoidance. These findings provide

an important understanding of the factors influencing tax avoidance practices in the context of sales

growth, fixed asset intensity, and institutional ownership.

Keyword: Sales Growth; Intensity of Fixed Assets; Tax Avoidance; Institutional Ownership

INTRODUCTION

Until now, tax revenue still plays a role as the largest contributor to state revenue, which is

part of the structure of the Indonesian State Budget (Wardani & Nugrahanto, 2022). Tax is a form

of mandatory contribution made by individuals and entities to the state with a coercive nature and

does not provide direct rewards but is used for state purposes for the country's development

process. Especially for Indonesia as a developing country that always tries to improve national

development for the welfare of the community. Taxes are one of the sources of national

development funds and public contributions to the state for national development (Oktaviyani &

Munandar, 2017). The statement is stated in the Law of the Republic of Indonesia Number 28 of

2007. Based on data obtained from the Central Statistics Agency, in the last three years tax

revenue has dominated the source of state financial revenue as stated in the table below.

Table 1 State Revenue Realization Table

Source of Revenue-

Finance

Realization of State Revenue

(Billion Rupiah)

2020

2021

2022

Tax Revenue

1.285.136,32

1.375.832,70

1.510.001,20

Non-Tax Revenue

343.814,21

357.210,10

335.555,62

Grant

18.832,82

2.700,00

579,90

Total

1.647.783,34

1.735.742,80

1.846.136,70

The huge role of taxes in the eyes of the state causes the state to continue to strive to develop

regulations that can support the growth of state tax revenue. Various systems were also developed

in order to facilitate the process of reporting and paying taxes and accommodate the needs of

taxpayers. Of course, this aims to encourage taxpayers to be more obedient to taxes so that tax

revenues are higher and the country's growth is more advanced.

The Effect of Sales Growth and Fixed Asset Intensity on Tax Avoidance with Institutional Ownership 
 
756    Return: Study of Economic And Business Management, Vol 2 (8), August 2023
       
Unlike  countries  that  consider  taxes  as  profitable,  taxpayers  actually  see  taxes  as  an 
obligation that can reduce company assets for the benefit of the state (Irawati et al., 2020). Taxes 
are considered a burden that can reduce the profits and income of economic activity actors (Nindita 
& Budi, 2022). The perspective of taxpayers has led to the rampant practice of tax avoidance among 
business people who  aim to reduce the amount of tax burden that  will be paid to  the  state. 
Companies will try to find weaknesses in existing regulations and then take appropriate business 
steps to reduce the tax burden. These measures are known as tax avoidance measures  (Rahmawati 
et al., 2016). 
Similar tax avoidance practices have also occurred in Indonesia, namely in the company 
PT Bentoel Internasional Investama. The British American Tobacco (BAT)-owned company is 
claimed to have made an economic contribution to offset the enormous health costs. As reported 
by the Tax Justice Network Institute on (Kontan.co.id, 2019) that BAT has diverted most of its 
revenue out of Indonesia using two ways, namely: through intra-company loans between 2013 
and 2015 and the second way through repayments back to the UK for royalty, fee and service 
payments. Bentoel took many loans  from  his  Dutch affiliate Rothmans Far  East  BV on  the 
grounds of financing bank debt and paying for the purchase of machinery and equipment. In 
addition, Bentoel also makes payments back to the UK for royalties, fees and IT costs at a rate of 
US $ 19.7 million per year. Both of these significantly exacerbated Bentoel's losses in Indonesia. 
In fact, these two costs are equivalent to 80% of the losses suffered by Bentoel before 2016.  
Tax  avoidance  practices  are  generally  initiated  by  company  managers  to  meet  the 
expectations  of  shareholders.  Managers  try  to  get  the  largest  profit  figures  in  the  financial 
statements because the greater the profit reported in the financial  statements, the greater the 
reciprocity that managers will receive from company owners. Management no longer carries out 
tax responsibilities as it should because their personal interests take precedence over the public 
interest, especially the public. Seeing how the state is so ambitious in its efforts to increase tax 
revenues to support state growth due to the need for greater state costs and financial support from 
taxpayers is one way out that is expected to save the country from the economic crisis. A much 
different perspective can be found from the side of companies that are now facing an onslaught 
of economic problems and are faced with the possibility of an increasingly real recession. Various 
efforts are made by the company in order to maintain existence in the business world. Both 
statements will encourage more tax avoidance cases in the future. Until now, tax avoidance is still 
a problem that is growing every day and is the concern of economic actors in the world, especially 
Indonesia. This then prompted the author to conduct further research on tax avoidance.  
Tax avoidance is driven by various factors, including the amount of company debt, high 
profits,  and  an  increase  in  sales  received  (Arinda  &;  Dwimulyadi,  2019).  In  essence,  every 
company  certainly  has  the  same  goal,  which  is  to  pursue  maximum  profits,  especially  in 
companies that are experiencing an increase in sales. The company will certainly try to keep sales 
growth always leading to positive and better things. When the company has high sales, of course, 
the profit received will also increase so that the tax responsibility owned becomes greater (Nugraha 
& Mulyani, 2019). Companies with rapid sales growth certainly need large financial support to 
fund this growth.  This causes companies to tend to carry out tax avoidance to reduce the amount 
of tax burden that must be paid to the state and increase profits to be allocated to efforts to increase 
company investment. Based on the results of research from (Nugraha & Mulyani, 2019) it is stated 
that sales growth or sales growth has a positive effect on tax avoidance. Similar results were also 
obtained from research (Januari & Suardikha, 2019), namely that sales growth has a positive effect 
on tax avoidance. Another case with research conducted by (Irawati et al., 2020) which concluded 
that sales growth has a significant negative effect on tax avoidance. However, the results of the 
study (Astuti et al., 2020) shows the opposite, namely that sales growth has no effect on tax 
avoidance.  Various  inconsistencies  arising  from  the  results  of  previous  research  cause  sales 
growth to need further investigation. 
Taxes as the largest contributor to state tax revenue to date cause research on taxes is always 
interesting  to  investigate.  The  amount  of  fiscal  effort  in  dispelling  tax  avoidance  practices 
encouraged researchers to conduct this study. This research is expected to provide input to the 

The Effect of Sales Growth and Fixed Asset Intensity on Tax Avoidance with Institutional Ownership

Return: Study of Economic And Business Management, Vol 2 (8), August 2023 757

Directorate General of Taxes in assessing which parts must be considered by the government in

preventing tax avoidance practices that can harm the state. The results of the study can also be

used by external parties in order to analyze financial statements more thoroughly and not solely

trust existing financial statements because there may be other behaviors carried out by managers

and underlying the financial statements.

Based on the background previously described, the researcher aims to conduct a study

entitled "The Effect of Sales Growth and Fixed Asset Intensity on Tax Avoidance with

Institutional Ownership as a Moderation Variable".

RESEARCH METHOD

Research design

This research is a type of quantitative research. The quantitative method used in this study

consists of testing the effect of sales growth and fixed asset intensity on tax avoidance with

institutional ownership as a moderation variable.

This research design uses a causal – explanatory design. In this study, a causal design was

used to test the relationship between independent variables, namely sales growth and fixed asset

intensity, to the dependent variable, namely tax avoidance with a moderating effect of institutional

ownership.

The type of data used in this study is in the form of secondary data originating from the

Indonesia Stock Exchange (IDX) through the www.idx.co.id page. The data used comes from the

company's financial statements.

Population and Sample Selection Techniques

The population of this study is manufacturing companies listed on the Indonesia Stock

Exchange (IDX) in the 2018-2020 period. The reason for choosing the population in the form of

manufacturing companies is because until now manufacturing companies are still considered as

one of the largest tax-contributing industrial sectors in Indonesia. Sample selection by purposive

sampling method. Purposive sampling is a method of selecting samples by making several

considerations so that the data obtained can be more representative of this study. The 135

observations consist of 45 manufacturing companies from three different sub-sectors, all of which

were listed consecutively from 2018 to 2020 on the Indonesia Stock Exchange (IDX). The

selection of 45 companies is based on several criteria needed in obtaining the necessary data and

reflecting the appropriate research subjects in order to obtain the expected research results.

RESULT AND DISCUSSION

Description of the object of study

Based on the selection results using predetermined criteria, a total of 135 companies were

obtained as data in this study. In processing data and tabulating data that has been collected,

researchers use Microsoft excel 2010 and Economic Views software (EViews) version 12. Data

description in the form of mean value, maximum, minimum, and standard deviation value from

the data pentabulation results. This study succeeded in obtaining the results of descriptive

statistical tests as follows:

Table 2 Descriptive Statistical Testing

Variable

Observation

Mean

Std. Dev.

Min

Max

Taxavo_ETR

135

0.288233

0.177523

-0.224337

0.971211

Taxavo_Taxocf

135

0.079678

0.217273

-0.122573

2.011940

Growth

135

0.028881

0.225650

-0.962542

0.858872

135

0.383415

0.205768

0.000951

0.957531

INS

135

0.554633

0.316335

0.001066

0.997112

The Effect of Sales Growth and Fixed Asset Intensity on Tax Avoidance with Institutional Ownership

758 Return: Study of Economic And Business Management, Vol 2 (8), August 2023

Size

135

28.97253

1.619306

26.48557

33.49453

Lev

135

0.399631

0.186091

0.003453

0.844782

Source: Processed using EViews 12.

Table 1 above shows the results of descriptive statistical tests on this study where the study

used 135 observations. The observations were taken from a sample of manufacturing companies

in 2018-2020 registered and listed on the IDX. Descriptive statistical tests were carried out on the

variables used, namely tax avoidance as the dependent variable (Y), sales growth and fixed asset

intensity as independent variables (X1 and X2), followed by moderation variables in the form of

institutional ownership (M) and equipped with two control variables, namely company size and

leverage. This study uses two proxies of tax avoidance because the purpose of this study is to

compare the effect received by tax avoidance through conforming tax and non-conforming tax

approaches. For tax conforming proxies, current ETR is used as one of the proxies that is

considered to best describe the position of tax avoidance in the company. Non-conforming tax

itself is represented by a TaxOCF proxy that compares taxes paid with operating cash flow. Table

1 presents the two proxies together.

Assumption Test Results

1. Panel Data Model Test

a. Chow test (comparison between Common Effect and Fixed Effect)

Table 3 Chow Conforming Test Tax Avoidance

Effects Tests

Statistics

d.f

Prob.

Equation 1 (no moderation)

Cross-section F

1.743123

(44.86)

0.0137

Cross-section Chi Square

86.068533

0.0001

Equation 2 (moderation)

Cross-section F

1.679005

(44.83)

0.0352

Cross-section Chi Square

85.943211

0.0004

Source: Processed using EViews 12.

From the results of the chow test above, equation 1 (without moderation) and equation 2

(with moderation) found results that are both below the alpha value of 5% (0.05) so it is concluded

that H0 from both equations is rejected so that the fixed effect model is considered more

recommended to be used.

Table 4 Chow Non-Conforming Test Tax Avoidance

Effects Tests

Statistics

d.f

Prob.

Equation 1 (without moderation)

Cross-section F

2.948298

(44.86)

0.0000

Cross-section Chi Square

124.153782

0.0000

Equation 2 (moderation)

Cross-section F

2.946208

(44.83)

0.0000

Cross-section Chi Square

126.998240

0.0000

Source: Processed using EViews 12.

The same results are also obtained from the results of the chow test using non-conforming

tax avoidance variables where the value of prob. cross-section F shows the number 0.0000 or

prob<0.05 so the more recommended model is the fixed effect model.

The Effect of Sales Growth and Fixed Asset Intensity on Tax Avoidance with Institutional Ownership

Return: Study of Economic And Business Management, Vol 2 (8), August 2023 759

b. Hausman Test (comparison between Fixed Effect and Random Effect)

Table 5 Hausman Conforming Tax Avoidance Test

Test Summary

Chi-sq. statistic

Chi-sq. d.f.

Prob.

Equation 1 (without moderation)

Cross-section

random

7.548544

0.0868

Equation 2 (with moderation)

Cross-section

random

8.936431

0.0226

Source: Processed using EViews 12.

The table above shows the values 0.0868 in equation 1 and 0.0226 in equation 2. Where

both have different prob values. This makes H0 rejected which means the model used is a fixed

effect model.

Table 6 Hausman Non- Conforming Tax Avoidance Test

Test Summary

Chi-sq. statistic

Chi-sq. d.f.

Prob.

Equation 1 (without moderation)

Cross-section

random

11.229008

0.0241

Equation 2 (without moderation)

Cross-section

random

11.356719

0.1238

Source: Processed using EViews 12.

Unlike the results of the hausman test on conforming tax avoidance, the test results on non-

conforming tax avoidance show a prob value. 0.0241 in equation 1 where the result of prob<0.05

and the value of equation 2 is 0.1238 so that prob.>0.05. Seeing this difference, H0 is considered

rejected so that the best model is the same fixed effect model as used in conforming tax avoidance.

The reason is because the results of the chow and hausman tests have produced the same model,

namely the fixed effect model, the model selection test has been stopped and produced a fixed

effect model as the best model so that in order to obtain the best results, the same model is used

in both studies.

2. Classical Assumption Test

a. Multicollinearity Test

In the multicollinearity test, it is expected that variables can be tested regarding the

presence or absence of entanglement between the variables used. This test will test the correlation

of each independent variable used in this study. According to (Ghozali, 2018), several causes of

correlation between independent variables can be found, including: (i) sampling method as a

method of collecting data; (ii) the emergence of constraints on models and populations; (iii) model

selection specifications; (iv) the number of independent variables greater than the observations

used. In order to be declared free of multicollinearity symptoms, the correlation value found

between independent variables must be lower than 0.8. This study has also conducted a

multicollinearity test with the following results:

Table 7 Multikolinearitas Variabel Independen Test

Growth_X1

IA_X2

Size_X3

Lev_X4

Growth_X1

1.0000

0.0628

0.0506

0.1392

IA_X2

0.0628

1.0000

0.1497

0.0443

Size_X3

0.0507

0.1497

1.0000

0.1618

Lev_X4

0.1392

0.0443

0.1618

1.0000

The Effect of Sales Growth and Fixed Asset Intensity on Tax Avoidance with Institutional Ownership

760 Return: Study of Economic And Business Management, Vol 2 (8), August 2023

Source: Processed using EViews 12.

The results of multicollinearity testing in this study can be seen in table 7 above. For the

variable sales growth against fixed asset intensity and vice versa between fixed asset intensity on

growth is indicated by a value of 0.0628 which is smaller than 0.8. Therefore, there is no problem

of multicollinearity between the two.

b. c test

The heteroscedasticity test is used to test for variance inequalities from residuals that

can occur between observations. Researchers used the whit test in determining the degree of

heteroscedasticity of this study. The test was performed on two equations both those that use

moderation and those that do not use moderation. The criteria used in testing are the

magnitude of the probability value of the heteroscedasticity test results. If the value of

prob.>0.05 or alpha then the model is declared free from symptoms of heteroscedasticity.

Here are the details of the test results that were successfully obtained.

Table 8 heteroscedasticity Conforming Tax Avoidance test

Equation 1 (without moderation)

F-statistic

0.993397

Prob. F (4,130)

0.4136

Obs*R-squared

4.004031

Prob. chi square (4)

0.4055

Scaled explained SS

88.25689

Prob. chi square (4)

0.0000

Equation 2 (with moderation)

F-statistic

1.159316

Prob. F (4,130)

0.3309

Obs*R-squared

8.108289

Prob. chi square (4)

0.3231

Scaled explained SS

166.1692

Prob. chi square (4)

0.0000

Source: author's preparation with EViews 12.

Table 8 shows the results that the variable conforming tax avoidance is free from

heteroscedasticity. This can be seen from the magnitude of the probability value of both equation

1 which is 0.4136 and equation 2 of 0.3309 which are both values greater than alpha (5%).

Table 9 Non-Conforming Tax Avoidance Heteroscedasticity Test

Equation 1 (no moderation)

F-statistic

2.037006

Prob. F (4,130)

0.0929

Obs*R-squared

7.962351

Prob. chi square (4)

0.0930

Scaled explained SS

24.55946

Prob. chi square (4)

0.0001

Equation 2 (with moderation)

F-statistic

1.596852

Prob. F (4,130)

0.1421

Obs*R-squared

10.92071

Prob. chi square (4)

0.1421

Scaled explained SS

31.54354

Prob. chi square (4)

0.0000

Source: author's preparation with EViews 12.

The results of the heteroscedasticity test on non-conforming tax avoidance test variables

were also declared free from heteroscedasticity. Tested from the probability value of the two

equations used that have yielded a value greater than 0.05 (5%). Equation 1 shows a value of

0.0929 and equation 2 with a value of 0.1421. Both test results showed that both models used by

this study were tested heteroscedasticity free.

The Effect of Sales Growth and Fixed Asset Intensity on Tax Avoidance with Institutional Ownership

Return: Study of Economic And Business Management, Vol 2 (8), August 2023 761

Regression Test Results

1. Conforming Tax Avoidance

Equation 1 (no moderation)

Test F (Simultaneous significant test)

Table 10 Test Table F Equation 1 Conforming Tax Avoidance

Dependent Variabel: Tax Avo_Y1

Method: Panel Least Squares

Date: 07/04/23 Time: 22.40

Sample: 2018 2020

Periods included: 3

Cross-sections included: 45

Total panel (balanced) observations: 135

Prob(F-statistic)

0.016331

Source: author's preparation with EViews 12.

From Table 10 above, the probability number (F-statistic) of 0.016331 is found, the result

is smaller than the alpha value of 5%. Therefore, it can be concluded that sales growth and fixed

asset intensity as independent variables in this study significantly affect together on the dependent

variable tax avoidance.

Test t (partial significant)

The summary of the results of the t test against equation 1 without moderation on the

dependent variable conforming tax avoidance is as follows:

Table 11 Multiple Linear Regression Test Table Equation 1 Conforming Tax Avoidance

Dependent Variabel: Tax Avo_Y1

Method: Panel Least Squares

Date: 07/04/23 Time: 22.40

Sample: 2018 2020

Periods included: 3

Cross-sections included: 45

Total panel (balanced) observations: 135

Variable

Coefficient

Std. Error

t-Statistic

Prob.

-0.410154

4.05912

-0.101035

0.9198

GROWTH_X1

0.061027

0.089557

0.681424

0.4974

IA_X2

-0.384913

0.337027

-1.142085

0.2566

SIZE

0.008670

0.142666

0.060769

0.9517

LEV

0.962061

0.421902

2.280293

0.0251

Source: author's preparation with EViews 12.

In the table above we can see the results of multiple linear regression analysis based on fixed

effect models. Looking at the results above, the first regression equation in the study can be made

as follows:

TaxAvo

1 i,t

= -0.410154

i,t

+ 0.061027 Growth

i,t

- 0.384913 IA

i,t

+ 0.008670 Size

i,t

0.962061 Lev

i,t +

1 i,t

Description: TaxAvo: Tax Avoidance; Growth: sales growth; IA: intensity of fixed assets; Size:

company size; Lev: Leverage.

The Effect of Sales Growth and Fixed Asset Intensity on Tax Avoidance with Institutional Ownership

762 Return: Study of Economic And Business Management, Vol 2 (8), August 2023

In order to determine the effect of the independent variable on the dependent variable

partially, a t test was conducted in this study. Here is the hypothesis that researchers used in the

t-test:

H0: sales growth and fixed asset intensity do not have a partial effect on tax avoidance.

H1: sales growth and fixed asset intensity have a partial effect on tax avoidance.

The t test also uses 95% confidence so that when the probability value is below 0.05 then H0

is rejected while vice versa when the probability value is above 0.05 then H0 is accepted. Let's

take a closer look at the position of the hypothesis testing results based on table 11 above:

a) H1: Sales growth has a positive effect on tax avoidance

The probability value resulting from testing through EViews 12 on the variable X1 sales

growth is 0.4947 which is greater than the value of 5% so that H0 is accepted, so there is no

partial influence between sales growth and tax avoidance. The coefficient is shown with a

value of 0.061027 which means that the resulting influence is positive. The conclusion that

can be drawn is that sales growth does not have a partial positive effect on tax avoidance.

b) H2: Fixed asset intensity has a positive effect on tax avoidance

The probability resulting from testing the variable X2, namely the intensity of fixed assets,

is 0.2566 with a coefficient value of -0.384913. Both values indicate a position where the

intensity of fixed assets is declared to have no partial effect on tax avoidance. A negative

number on the coefficient indicates a negative nature, so the conclusion that can be made is

that the intensity of fixed assets does not have a partial negative influence on tax avoidance.

Therefore, H2 is rejected.

Adjusted R

Test (Coefficient of Multiple Determination)

The use of the coefficient of determination test is intended to gain an understanding of how

much influence the independent variable can have on the dependent variable. The value used

comes from the adjusted value of R

obtained from the results of data processing in the fixed

effect model. Let's check the adjusted R

test results in the following table:

Table 12 Adjusted R

Conforming Tax Avoidance Test

Dependent Variabel: Tax Avo_Y1

Method: Panel Least Squares

Date: 07/04/23 Time: 22.40

Sample: 2018 2020

Periods included: 3

Cross-sections included: 45

Total panel (balanced) observations: 135

R-squared

0.486651

Adjusted R-Squared

0.200131

Source: author's preparation with EViews 12.

Table 11 shows that the adjusted value of R2 obtained from testing conforming tax avoidance

using equation 1 produces a value of 0.200131 which means that sales growth and intensity of

fixed assets as independent variables X1 and X2 are able to affect the tax avoidance variable or

variable Y by 20.01% and the remaining 79.99% is explained using variables that are not used in

this study.

The Effect of Sales Growth and Fixed Asset Intensity on Tax Avoidance with Institutional Ownership

Return: Study of Economic And Business Management, Vol 2 (8), August 2023 763

Equation 2 (using moderation)

Test F (Simultaneous significant test)

Table 13 Test Table F Equation 2 Conforming Tax Avoidance

Dependent Variabel: Tax Avo_Y1

Method: Panel Least Squares

Date: 07/04/23 Time: 22.40

Sample: 2018 2020

Periods included: 3

Cross-sections included: 45

Total panel (balanced) observations: 135

Prob(F-statistic)

0.038413

Source: author's preparation with EViews 12.

Table 13 above shows a probability value (F-statistic) of 0.038413 with a value below 5%.

Therefore, it is concluded that the variables of sales growth, the intensity of fixed assets, along

with the variables of moderation of institutional ownership can have a significant influence

simultaneously on the variable of tax avoidance.

Test t (partial significant)

The summary of the results of the t test against equation 2 with the variable moderation of

institutional ownership against the dependent variable conforming tax avoidance is as follows:

Table 14 Multiple Linear Regression Test Table Equation 2 Conforming Tax Avoidance

Dependent Variabel: Tax Avo_Y1

Method: Panel Least Squares

Date: 07/04/23 Time: 22.40

Sample: 2018 2020

Periods included: 3

Cross-sections included: 45

Total panel (balanced) observations: 135

Variable

Coefficient

Std. Error

t-Statistic

Prob.

-0.378241

4.162760

-0.090863

0.9278

GROWTH_X1

0.116509

0.238009

0.489515

0.6258

IA_X2

-0.448132

0.425110

-1.054154

0.2949

SIZE

0.008561

0.146010

0.058630

0.9534

LEV

0.942450

0.445323

2.116331

0.0373

INS_M

-0.030113

0.286209

-0.105213

0.9165

INS_GROWTH_X1

-0.076627

0.315904

-0.242565

0.8089

INS_IA_X2

0.091518

0.536534

0.170573

0.8650

Source: test results with EViews 12.

In table 14 above we can see the results of multiple linear regression analysis based on

equation 2 with the use of institutional ownership variables as moderation variables. Continuing

the results above, the second regression equation in the study is as follows:

TaxAvo

2 i,t

= -0.378241

+ 0.116509 Growth

i,t

- 0.448132

i,t

+ 0.008561 Size

i,t

+ 0.942450 Lev

i,t

–

0.076627 Ins*Growth

i,t +

0.091518 Ins*IA

i,t +

2,i,t

Description: TaxAvo: Tax Avoidance; Growth: sales growth; IA: intensity of fixed assets; Size:

company size; Lev: Leverage.

The Effect of Sales Growth and Fixed Asset Intensity on Tax Avoidance with Institutional Ownership

764 Return: Study of Economic And Business Management, Vol 2 (8), August 2023

Based on the above equation, the following is the hypothesis that the researcher used in the

t test:

: Sales growth and fixed asset intensity moderated by institutional ownership did not

significantly affect tax avoidance.

: Sales growth and fixed asset intensity moderated by institutional ownership significantly

affected tax avoidance.

The alpha value used in this study is 0.05 or means that this study uses 95% confidence so

that when the probability value is below 0.05 then H0 will be considered rejected while vice versa

when the probability value is above 0.05 then H0 will then be accepted. The test results of this

second equation produce answers to the researchers' hypotheses as follows:

: Institutional ownership weakens the effect of sales growth on tax avoidance.

The probability value of this hypothesis is shown by 0.8089 or is above 0.05 besides that

the test results also show a regression coefficient value of -0.076627 which means that the

resulting relationship is true in the form of negative traits or institutional ownership is weakening

the effect of sales growth on tax avoidance. The conclusion drawn from this test is that

institutional ownership is not able to significantly weaken the influence that sales growth has on

tax avoidance.

: Institutional ownership weakens the effect of fixed asset intensity on tax avoidance

Table 14 shows the probability value of institutional ownership to fixed asset intensity of

0.8650 with a coefficient value of 0.091518. This means that institutional ownership does not

succeed in reinforcing the significant effect of fixed asset intensity on tax avoidance or it can be

concluded that H4 is rejected.

Adjusted R2 Test (Coefficient of Multiple Determination)

Here are the details of the adjusted value of R

in equation 2 with the use of moderation

variables:

Table 15 Tabel Uji Adjusted R

Persamaan 2 Conforming Tax Avoidance

Dependent Variabel: Tax Avo_Y1

Method: Panel Least Squares

Date: 07/04/23 Time: 22.40

Sample: 2018 2020

Periods included: 3

Cross-sections included: 45

Total panel (balanced) observations: 135

R-squared

0.487220

Adjusted R-Squared

0.172138

Sumber: hasil olahan penulis dengan EViews 12.

Table 15 shows the adjusted value R2 of equation 2 produces a value of 0.172138 or can be

interpreted as the amount of influence brought by the variable of sales growth, the intensity of

fixed assets, along with its interaction with the moderation variable on the variable tax avoidance

is 17.21% and the difference of 82.79% is explained using variables and other factors that have

not been discussed in this study.

The Effect of Sales Growth and Fixed Asset Intensity on Tax Avoidance with Institutional Ownership

Return: Study of Economic And Business Management, Vol 2 (8), August 2023 765

2. Non-Conforming Tax Avoidance

1) Equation 1 (without moderation)

Test F (Simultaneous significant test)

Table 16 Test Table F Equation 1 Non-Conforming Tax Avoidance

Dependent Variabel: Tax Avo_Y2

Method: Panel Least Squares

Date: 07/04/23 Time: 20.43

Sample: 2018 2020

Periods included: 3

Cross-sections included: 45

Total panel (balanced) observations: 135

Prob(F-statistic)

0.000005

Source: author's preparation with EViews 12.

Judging from table 16 above, it is seen that there is a probability value (F-statistic) of 0.000005,

which is below the probability value of 0.05. So it can be concluded that sales growth and fixed

asset intensity can significantly and simultaneously have an influence on tax avoidance.

Test t (partial significant)

Based on the results of previous model tests, in non-conforming tax avoidance research,

fixed effect model results were also obtained as the data model to be used in this study. Here is

a t-test table on non-conforming tax avoidance:

Table 17 Multiple Linear Regression Test Table Equation 1 Non-Conforming Tax Avoidance

Dependent Variabel: Tax Avo_Y2

Method: Panel Least Squares

Date: 07/04/23 Time: 20.43

Sample: 2018 2020

Periods included: 3

Cross-sections included: 45

Total panel (balanced) observations: 135

Variable

Coefficient

Std. Error

t-Statistic

Prob.

-1.407925

2.831296

-0.497272

0.6203

GROWTH_X1

0.001763

0.062462

0.028219

0.9776

IA_X2

0.626765

0.235058

2.666423

0.0092

SIZE

0.047459

0.099502

0.476970

0.6346

LEV

0.202138

0.294255

0.686948

0.4940

Source: author's preparation with EViews 12.

Table 17 shows the t-test results obtained from the FEM data model. In the table above we

can see how the test results can be entered into the equation that has been made previously with

the following results:

TaxAvo

1 i,t

= -1.407925

i,t

+ 0.001763 Growth

i,t

+ 0.626765 IA

i,t

+ 0.047459 Size

i,t

+ 0.202138

Lev

i,t +

1 i,t

Description: TaxAvo: Tax Avoidance; Growth: sales growth; IA: intensity of fixed assets; Size:

company size; Lev: Leverage.

Testing of this partial significance value uses a value of 0.05 as the basis for determining

the test. The selection of 0.05 was due to the use of confidence by 95% in this study. So the

The Effect of Sales Growth and Fixed Asset Intensity on Tax Avoidance with Institutional Ownership

766 Return: Study of Economic And Business Management, Vol 2 (8), August 2023

conclusion is obtained if the probability value is below the alpha value then H0 is rejected and

when the probability value is above the alpha value then H0 is accepted.

a) H

: Sales growth has a positive effect on tax avoidance

Looking at the probabtility value presented in Table 17, it was found that the value of

0.9776 was greater than the value of 0.05. This figure is obtained from the results of data

processing using the FEM data model. Sales growth as variable X1 is considered unable to

partially affect variable Y tax avoidance based on the results of the hypothesis test above.

The value is 0.9776>0.05 then H0 is accepted. The value of the coefficient is indicated by

a positive value of 0.001763 which means that the relationship between X1 and Y is

positive. The conclusion of this hypothesis is that sales growth is not able to positively

affect tax avoidance.

b) H

: Fixed asset intensity has a positive effect on tax avoidance

The variable intensity of fixed assets or variable X2 in this study displays a probability

value of 0.0092 where the value is below the value of 0.05 so that it is concluded that H0

is rejected which means that there is a partial influence given by the variable intensity of

fixed assets to the tax avoidance variable. The probability value is also followed by a

coefficient value of 0.047459 which means that the existing relationship is positive.

Therefore, based on these two values, it can be concluded that the intensity of fixed assets

(X1) has a partial positive influence on tax avoidance (Y) so that H0 is rejected and H1 is

accepted.

Adjusted R

Test (Coefficient of Multiple Determination)

The test is continued with the multiple coefficient of determination test where this test is

expected to provide an overview of the amount of influence that can be given from the

independent variable (sales growth and fixed asset intensity) to the dependent variable (tax

avoidance). For the process of determining the results, we can see the adjusted value of R2

obtained in the previous test. The test results of equation 1 non-conforming tax avoidance are as

follows:

Table 18 Adjusted Test Table R2 Non-Conforming Tax Avoidance

Dependent Variabel: Tax Avo_Y2

Method: Panel Least Squares

Date: 07/04/23 Time: 20.43

Sample: 2018 2020

Periods included: 3

Cross-sections included: 45

Total panel (balanced) observations: 135

R-squared

0.625944

Adjusted R-Squared

0.417169

Source: author's preparation with EViews 12.

Table 18 shows the adjusted value of R2 obtained from testing non-conforming tax

avoidance equation 1 produces a value of 0.417169 which means that variables X1 and X2 in this

study (sales growth and fixed asset intensity) affect the tax avoidance variable or variable Y by

41.72% and the remaining 58.28% can be influenced by other factors outside this study.

2) Equation 2 (using moderation)

Test F (Simultaneous significant test)

Table 19 Tabel Uji F Persamaan 2 Non-Conforming Tax Avoidance

Dependent Variabel: Tax Avo_Y2

Method: Panel Least Squares

Date: 07/04/23 Time: 20.43

The Effect of Sales Growth and Fixed Asset Intensity on Tax Avoidance with Institutional Ownership

Return: Study of Economic And Business Management, Vol 2 (8), August 2023 767

Sample: 2018 2020

Periods included: 3

Cross-sections included: 45

Total panel (balanced) observations: 135

Prob(F-statistic)

0.000008

Source: author's preparation with EViews 12.

Table 19 above shows a probability number (F-statistic) of 0.000008 which means it is

below 0.05. Therefore, it was concluded that the variables of sales growth, the intensity of fixed

assets, along with the variables of moderation of institutional ownership were able to have a

significant influence simultaneously on the variable of tax avoidance.

T Test (partial significant)

The summary of the results of the t test against equation 2 with the variable moderation of

institutional ownership to the dependent variable non-conforming tax avoidance is as follows:

Table 20 Multiple Linear Regression Test Table Equation 2 Non-Conforming Tax Avoidance

Dependent Variabel: Tax Avo_Y2

Method: Panel Least Squares

Date: 07/04/23 Time: 20.43

Sample: 2018 2020

Periods included: 3

Cross-sections included: 45

Total panel (balanced) observations: 135

Variable

Coefficient

Std. Error

t-Statistic

Prob.

-1.553809

2.851339

-0.544940

0.5873

GROWTH_X1

0.223196

0.163027

1.369069

0.1747

IA_X2

0.579020

0.291185

1.988497

0.0501

SIZE

0.056381

0.100012

0.563746

0.5744

LEV

0.093171

0.305030

0.305450

0.7608

INS_M

-0.057017

0.196043

-0.290841

0.7719

INS_GROWTH_X1

-0.323157

0.216383

-1.493448

0.1391

INS_IA_X2

-0.085009

0.367506

-0.231312

0.8176

Source: test results with EViews 12.

Table 20 displays the results of multiple linear regression analysis based on equation 2 with

the addition of institutional ownership variables as moderation variables. Based on the results of

the t test above, the regression equation can be obtained as follows:

TaxAvo

2 i,t

= -1.553809

+ 0.223196 Growth

i,t

+ 0.579020 IA

i,t

+ 0.056381 Size

i,t

+ 0.93171

Lev

i,t –

0.323157 Ins*Growth

i,t -

0.085009 Ins*IA

i,t +

2,i,t

Description: TaxAvo: Tax Avoidance; Growth: sales growth; IA: intensity of fixed assets; Size:

company size; Lev: Leverage.

The test results of this second equation produce answers to the researchers' hypotheses as

follows:

a) H

: Institutional ownership weakens the effect of sales growth on tax avoidance.

The probability value of this hypothesis is shown by the number 0.1391 which is in a position

of more than 0.05 with the test results of the regression coefficient of -0.323157 which means

that the resulting relationship is negative or institutional ownership is weakening the effect

of sales growth on tax avoidance. Therefore, it can be concluded that institutional ownership

is not able to significantly weaken the effect of sales growth on tax avoidance.

b) H

: Institutional ownership weakens the effect of fixed asset intensity on tax avoidance

The Effect of Sales Growth and Fixed Asset Intensity on Tax Avoidance with Institutional Ownership

768 Return: Study of Economic And Business Management, Vol 2 (8), August 2023

Table 20 can see the probability of institutional ownership to the intensity of fixed assets is

at a probability value of 0.8176 accompanied by a coefficient value of -0.085009. The nature

of the influence of institutional ownership on intensity is negative, which means that

institutional ownership has a tendency to weaken the influence of fixed asset intensity on tax

avoidance. Based on the two values above, the conclusion of hypothesis 4 is that institutional

ownership has not succeeded in weakening the significant effect of fixed asset intensity on

tax avoidance.

Discussion

After successfully testing with the results that have been expressed in the previous points,

the results of hypothesis testing were obtained on hypotheses that had been prepared previously

both on the types of conforming tax avoidance and non-conforming tax avoidance research. The

following is a summary of all the results of the hypothesis test (t test) conducted on this study:

Table 21 Hypothesis Test Results

Hipotesis

Coefficient

Prob.

Kesimpulan

Testing of Conforming Tax Avoidance

: Sales growth has a positive

effect on tax avoidance

0.061027

0.4974

rejected

: Fixed asset intensity has a

positive effect on tax

avoidance

-0.384913

0.2566

rejected

Test F (Equation 1 without

moderation)

0.016331

Accepted

: Institutional ownership

weakens the effect of sales

growth on tax avoidance

-0.076627

0.8089

rejected

: Institutional ownership

weakens the effect of fixed

asset intensity on tax

avoidance

0.091518

0.8650

rejected

Test F (Equation 2 with

moderation)

0.038413

Accepted

Testing of Non-Conforming Tax Avoidance

: Sales growth has a

positive effect on tax

avoidance

0.001763

0.9776

rejected

: Fixed asset intensity has a

positive effect on tax

avoidance

0.626765

0.0092

Accepted

Test F (Equation 1 without

moderation)

0.000005

Accepted

: Institutional ownership

weakens the effect of sales

growth on tax avoidance

-0.323157

0.1391

rejected

: Institutional ownership

weakens the effect of fixed

-0.085009

0.8176

rejected

The Effect of Sales Growth and Fixed Asset Intensity on Tax Avoidance with Institutional Ownership

Return: Study of Economic And Business Management, Vol 2 (8), August 2023 769

asset intensity on tax

avoidance

Test F (Equation 2 with

moderation)

0.000008

Accepted

Source: Author's work

Looking at the results of the hypothesis test that has been summarized in Table 21 above,

it can be described the discussion for each hypothesis used in this study as follows:

1. The Effect of Sales Growth on Tax Avoidance

Referring to the results of the hypothesis test which can also be seen in the summary in

table 21, it can be seen that the sales growth variable as an independent variable produces 2

regression coefficient values and 2 different probability values from testing using TaxOCF

proxies on conforming tax avoidance and those derived from Current ETR proxies for testing

non-conforming tax avoidance . For testing with the TaxOcf proxy, a regression coefficient of

0.061027 was obtained, which means that the nature of the influence of this variable is

positive. The same thing is obtained from the test results using the Current ETR proxy where

the current of influence obtained is also positive, which is 0.001763. Both tests produce the

same direction i.e. positive. To determine whether or not the hypothesis that has been built is

accepted, the author refers to the probability value, namely 0.4974 for testing conforming tax

avoidance and 0.9776 for non-conforming tax avoidance. The two values are in a greater

position than 5%, so it shows that both in terms of conforming and non-conforming tax

avoidance there is no significant effect of sales growth on tax avoidance in research conducted

on manufacturing companies used as samples in the study.

The test results are in line with research that has been done previously by Arinda &

Dwimulyani (2019), Astuti et. Al (2020), and Oktaviyani &; Munandar (2017). The opposite

results were found from research conducted by Nugraha &; Mulyani (2019), January &;

Suardikha (2019), and Safitri &; Damayanti (2021), these studies showed a positive influence

given by sales growth to tax avoidance as a dependent variable.

Looking back at the agency theory used as the basis for this study, increased sales tend

to encourage managers to do tax avoidance in order to maintain good performance of the

company under the manager's managerial. The higher sales are synonymous with the higher

profits that the company will report in the annual report as the basis for calculating its taxes,

resulting in a mountain of tax burdens that must be borne by the company. In order to avoid

this, it must be one of the manager's tasks to overcome these problems, tax avoidance tends

to be the way to be used. It turns out that not all companies that experience an increase in sales

choose to do tax avoidance. The reason is because with the greater sales, it will be

accompanied by the greater the scale of the company's business and this development will

inevitably cause an increase in the value of tax payments to the state (Arinda & Dwimulyani,

2018). Tax avoidance will be difficult to do considering the proportion generated in terms of

company size will be unequal and not in accordance with the objectives of the company if the

tax paid does not increase so that tax avoidance is not an option taken by many managers.

2. The effect of fixed asset intensity on tax avoidance

The hypothesis test conducted showed the value of the regression coefficient of the fixed

asset intensity variable which differed between research on conforming and non-conforming

tax avoidance. In testing the current ETR proxy, a positive result of 0.626765 was received,

while testing using TaxOCF resulted in a negative value of -0.384913. This difference

indicates a difference in the impact resulting from the same independent variable on 2

dependent variable proxies. The probability results received are also different where for

conforming tax avoidance a result of 0.2566 or greater than 0.05 is found so that the hypothesis

The Effect of Sales Growth and Fixed Asset Intensity on Tax Avoidance with Institutional Ownership

770 Return: Study of Economic And Business Management, Vol 2 (8), August 2023

is rejected or there is no positive influence given by the intensity of fixed assets on tax

avoidance. These results are relevant to previous results according to (Sundari & Aprilina,

2017) but are inversely proportional to research from (Purwanti & Sugiyarti, 2017; Rizky &

Puspitasari, 2020) where fixed asset intensity has a significant positive influence on tax

avoidance.

When viewed from the side of conforming tax avoidance, the intensity of fixed assets is

considered not a red flag for the use of tax avoidance in a company. So far, the use of fixed

assets as a way of reducing the tax burden is considered one of the safest and most effective

ways. Where the size of the company is not necessarily accompanied by an increase in profits

due to depreciation expenses that can suppress profits and improve tax avoidance practices.

When related to the TaxOCF formula as a proxy that calculates the amount of practice from

the point of spending money, the intensity of fixed assets is considered unable to show a

significant effect considering that the intensity of fixed assets reduces the tax burden in terms

of expenses rather than directly on money out. In addition, conforming tax avoidance focuses

on looking at tax avoidance risks not only in terms of accounting income but also in terms of

tax income, namely seeing whether there is a gap between the company's attitude and tax

regulations (Satyadini, 2018). The high number of fixed assets cannot be used as a benchmark

for tax avoidance practices considering that there is no gap between the increase in fixed assets

and applicable tax regulations in Indonesia.

One interesting thing about the results of research with this variable is the difference in

results obtained from the two proxies used. The results with the current ETR proxy show a

probability value of 0.0092 is far below the alpha value of 0.05. This value shows that H2 is

accepted, which means that the intensity of fixed assets positively has a significant effect on

tax avoidance. This result becomes relevant to the research of (Purwanti & Sugiyarti, 2017; Rizky

& Puspitasari, 2020) which was previously inversely proportional in terms of conforming tax

avoidance. In terms of accounting income, the intensity of fixed assets is considered to play a

role in tax avoidance practices carried out by companies as taxpayers. Because, the greater the

fixed assets owned by the company, the greater the depreciation expense recognized and then

will cause the effect of decreasing company profits and shrinking the value of the company's

tax burden. This is in line with agency theory where management will do everything necessary

in fighting for low taxable income which means increased profits for shareholders (Purwanti &

Sugiyarti, 2017).Therefore, the intensity of fixed assets can still be accepted as one of the

supporting factors in reviewing the risk of tax avoidance in a company.

3. Institutional Ownership in Moderation on the Effect of Sales Growth on Tax Avoidance

Based on the results of hypothesis tests that have been carried out both on conforming

and non-conforming tax avoidance, similar results were obtained related to moderation carried

out by institutional ownership on the effect of sales growth on tax avoidance. The coefficient

values of both are negative, namely -0.076627 for the use of TaxOCF proxies and -0.323157

for current ETRs. This means that the influence generated by the moderation variable of

institutional ownership is negative or tends to weaken the influence of the independent variable

on the dependent variable. The probability value of institutional ownership is 0.8089>0.05 for

the conforming side , which means institutional ownership cannot weaken the effect of sales

growth on tax avoidance. The same was found in the non-conforming tax avoidance study

with a probability of 0.1393>0.05 which means that both showed similarities in their inability

to moderate the negative effect of variable X1 sales growth on variable Y tax avoidance.

Similar to this study, research conducted by (Dewi & Sari, 2015; Tandean & Winnie, 2016;

Windaryani & Jati, 2020) also found that institutional ownership has no effect on tax

avoidance. Another thing with (Pramana & Wirakusuma, 2019) research which succeeded in

finding the moderation effect of institutional ownership that is negative on tax aggressiveness.

The Effect of Sales Growth and Fixed Asset Intensity on Tax Avoidance with Institutional Ownership

Return: Study of Economic And Business Management, Vol 2 (8), August 2023 771

(Ristanti, 2022; Safitri & Damayanti, 2021) also received significant positive results in their

research on institutional ownership as a moderating variable on the influence of independent

variables on dependent variables.

The results showed that H3 was rejected on the hypothesis that had been built by the

researcher. Institutional ownership is a form of Good Corporate Governance applied to several

companies listed on the IDX in 2018-2020 as the population of the study. GCG basically aims

to provide good supervision and management system for companies. In particular, institutional

ownership is considered capable of suppressing conflicts that arise between management and

shareholders due to the existence of institutions that constantly monitor the flow of company

reports which makes it difficult for managers to carry out practices that are considered

detrimental to the company's reputation. In fact, shareholders have almost the same goal,

which is to obtain large profits and have a share in a profitable company. Therefore,

institutional ownership may not necessarily be a benchmark for reducing the effect of sales

growth on tax avoidance practices within the company.

4. Institutional Ownership in Moderation on the Effect of Fixed Asset Intensity on Tax

Avoidance

This study obtained results that showed the influence of institutional ownership

moderation variables on the independent variable of fixed asset intensity in conforming tax

avoidance of 0.091518 where the interaction was in the form of positive interactions. The

result is also equipped with a probability value of 0.8650>0.05 so that this result is contrary to

H4 so that the hypothesis is rejected which means institutional ownership is considered unable

to weaken the effect of fixed asset intensity on tax avoidance. For research on non-conforming

tax avoidance, a coefficient value of -0.085009 was obtained, which means that the nature of

the influence of institutional ownership on the effect of fixed asset intensity on tax avoidance

is negative, slightly different from the results obtained from the conforming side , which is

positive. In terms of probability, the value obtained is 0.8176>0.05, which means that the

hypothesis is also rejected from this side.

Although institutional ownership is considered capable of violently stopping management

behavior in an effort to maintain company profits, it has not been able to be proven tangibly

through this study. Decisions from institutional shareholders do not only focus on maintaining

reputation and systems but must be understood that the welfare of shareholders remains

paramount. Therefore, institutional ownership is not necessarily able to definitively reduce tax

avoidance in a company.

CONCLUSION

Based on all the results of the tests carried out, the conclusions conveyed are as follows:

1. Sales growth does not significantly affect tax avoidance. This result is obtained both from

the conforming and non-conforming sides, which means that hypothesis 1 (H1) that has been built

is declared rejected. The hypothesis previously built was that sales growth had a significant

positive influence on tax avoidance. The rejection of the hypothesis was motivated by the results

of the t test which showed probability values of 0.4974 and 0.9776 so that H1 was rejected and it

could be said that sales growth did not have a significant effect on tax avoidance.

2. Fixed asset intensity significantly affects tax avoidance in terms of non-conforming but

is not able to significantly affect in terms of conforming tax. These results are obtained based on

different probability values between conforming and non-conforming tax avoidance tests. The

probabilities are 0.2566>0.05 (conformin) and 0.0092<0.05 (non-conforming). Researchers

believe that this is due to differences in the point of view of conforming and non-conforming tax

where the intensity of fixed assets has a significant positive influence on tax avoidance when

viewed from the accounting income side. However, it becomes less significant when viewed in

terms of tax income or money outflow.

The Effect of Sales Growth and Fixed Asset Intensity on Tax Avoidance with Institutional Ownership 
 
772    Return: Study of Economic And Business Management, Vol 2 (8), August 2023
       
3. Institutional ownership cannot  weaken the effect of sales growth  on  tax avoidance. 
Therefore, hypothesis 3 of this study which states that institutional ownership can weaken the 
effect of sales growth on tax avoidance is rejected. The decision was taken based on the results 
of  the  t  test  with  a  coefficient  value  of  -0.076627 with a  probability of  0.8089  in  terms  of 
conforming tax and a coefficient result of -0.323157 with a probability of 0.1391. Furthermore, it 
is  certain that institutional  ownership is unable to weaken  the  effect of sales growth  on  tax 
avoidance. 
4. Institutional ownership is unable to weaken the effect of fixed asset intensity on tax 
avoidance. Based on the results of the t test in the data model, a coefficient value of 0.091518 and 
a probability of 0.8650 were obtained in terms of  conforming tax, which means institutional 
ownership cannot significantly weaken the effect of fixed asset intensity on tax avoidance. The 
same is also obtained from non-conforming tax testing where the coefficient value is -0.085009 
and the probability is 0.8176. From the value submitted, it can be seen that both are above the 
value of 5%, then H4 becomes rejected. 
 
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