THE EFFECT OF PROFITABILITY THROUGH TAX MANAGEMENT AND TAX AVOIDANCE ON BANKING COMPANIES IN INDONESIA

Abstract

This study examines the influence of Tax Management and Tax Avoidance on the profitability of banking sector companies in Indonesia, using secondary data from the annual financial statements of eight banks listed on the Indonesia Stock Exchange (IDX) for the period 2020–2022.

The study applies multiple linear regression analysis to determine the impact of Tax Management and Tax Avoidance on profitability, measured using Return on Assets (ROA), Return on Equity (ROE), and Net Profit Margin (NPM). The findings indicate that effective Tax Management significantly improves ROA and ROE, suggesting that proper management of tax obligations can enhance asset efficiency and equity returns. In contrast, aggressive Tax Avoidance has a negative effect on NPM, indicating that poorly managed avoidance strategies may reduce net profit margins.

These results highlight the importance for banking companies to maintain a balanced approach to Tax Management and Tax Avoidance. By optimizing tax strategies, banks can improve overall profitability while minimizing potential legal and reputational risks associated with aggressive tax practices. The study provides practical insights for banking management to strengthen financial performance through careful and strategic tax planning