Can Firm Size Moderate a Company's Tax Avoidance in Retail Trading?

Today, tax optimisation is part of the management practices of many corporations and is intended to leave more funds at the disposal of businesses that should rightfully be transferred to the government. Managers adopt tax avoidance tactics to boost post-tax profits to meet the shareholders' expectations. This study aims to assess the impact of profitability, leverage, and liquidity on tax evasion by companies in Indonesia's retail trading. Firm size is chosen as a moderating variable used to examine the effect of company resources on enhancing tax evasion measures. 21 retail trade companies served as the samples. 105 observational data points were collected over the research period from 2017 to 2021. This study utilised secondary data from the audited financial reports of all retail trading companies. The data analysis method uses Structural Equation Modeling (SEM) with a Partial Least Square (PLS) approach. The analysis showed that profitability, leverage and firm size have no significant effect on tax avoidance of retail trading companies listed on the IDX from 2017 to 2021. Firm size cannot moderate the impact of profitability and leverage on tax avoidance. Meanwhile, liquidity has a significant effect on tax avoidance. In addition, firm size can moderate the impact of liquidity on tax avoidance. Companies' efforts to avoid taxes may have a detrimental impact on their reputation. Based on this provision, companies should look for other ways to improve their financial situation without ceasing to pay taxes in full. Investors should consider the dangers and probable repercussions of tax-dodging strategies in highly liquid corporations. High-risk tax avoidance techniques may draw the attention of tax authorities and result in penalties or reputational harm. Investors should consider this risk before investing.