The Impact of ESG Performance on Tax Avoidance under Financial Constraints
Fajar Odiatma (a*), Heru Tjaraka (a), Santi Novita (a), Rheny Afriana Hanif (b), Friska Angelia (c)

a) Department of Accounting, Faculty of Economics and Business, Universitas Airlangga
b) Department of Accounting, Faculty of Economics and Business, Universitas Riau
c) Student of Diploma 3 Taxation Study Program, Faculty of Economics and Business, Universitas Riau

* fajar.odiatma-2022[at]feb.unair.ac.id

Abstract

This study aims to examine the impact of Environmental, Social, and Governance (ESG) performance on tax avoidance. Additionally, the study also examines financial constraints of firms as a moderator in this relationship. The study uses manufacturing and mining companies listed on the Indonesia Stock Exchange (IDX) with an observation period from 2017 to 2022. Data analysis employs panel data analysis using the Generalized Least Squares (GLS) method. The results indicate that ESG performance has a negative impact on tax avoidance. The aspect with the strongest contribution is good corporate governance. However, other results show that financial constraints experienced by the company weaken the impact of ESG performance on tax avoidance. This study provides important insights into how ESG performance can influence tax avoidance in the context of firms experiencing financial constraints. The study has high originality because it combines the analysis of ESG performance with financial constraints as a moderating variable, an approach that has not been widely applied in the context of Indonesian companies.

Keywords: ESG, Tax Avoidance, Financial Constraints, Indonesia

Topic: Taxation