The Effect of Leverage, Liquidity and Firm Size on Tax Aggressiveness

Tax aggressiveness occurs when businesses apply various tax techniques to lower the amount of tax payable. This study aims to analyze the influence of such factors as leverage, liquidity, and firm size on the tax aggressiveness of companies in the building and construction industry. The level of tax aggressiveness is measured using the effective tax rate. The leverage indicator is presented by a debt-to-equity ratio, which shows the part of the total amount of funds used to pay the debt. The liquidity indicator is presented by a current ratio, which shows the company's ability to settle short-term obligations or debts that must be paid off when due. The firm size is defined as the natural logarithm of the company's total assets. The data for this study were obtained from the audited financial statements of the companies listed on the Indonesia Stock Exchange (IDX). The research sample covers 21 construction and building subsector companies. The research period lasted from 2020 to 2022, and 63 observation data were collected. For data analysis, the method used is Partial Least Square (PLS). The findings indicate that leverage and firm size do not significantly impact tax aggressiveness. Conversely, liquidity positively and significantly impacts tax aggressiveness. At the same time, the variables selected for this study explain only 15.5% of the variability of tax aggressiveness. This means that this study does not cover many other factors influencing a company's decision to optimize tax. Companies must conduct tax policy in compliance with legislation, which is one of the elements of the social responsibility of business. Although tax aggressiveness can provide short-term benefits, companies must consider potential reputational risks and long-term impacts. Transparency and compliance with tax regulations can also reduce the risk of conflict with tax authorities.