The Effect of CSR and ESG Disclosure on Tax Avoidance with Financial Performance as a Moderation

This research was conducted with the aim of testing and analyzing the effect of Corporate Social Responsibility and ESG Disclosure on Tax Avoidance with Financial Performance as a moderating variable. The data sources for this study are 66 annual reports and sustainability reports from banking companies listed on the IDX for the 2018-2022 period. The sample in this study was determined using the purposive sampling method with the first criterion being companies that published annual reports and sustainability reports for 2018-2022 and companies that had published annual reports and reports for the 2022 period before June 15, 2023. The variables used in this study were tax avoidance as the dependent variable measured using the Effective Tax Rate (ETR) proxy, corporate social responsibility and ESG Disclosure as independent variables each measured using the CSR Score and ESG Score, and financial performance as a moderating variable measured using Return on Assets. The results of this study state that Corporate Social Responsibility and ESG Disclosure have no effect on tax avoidance. Then, financial performance using Return on Assets measurement is significantly stated to be able to strengthen the relationship between Corporate Social Responsibility and ESG Disclosure on tax avoidance. Research purpose: This research is important for companies to know the impact that will arise if the company is proven to have committed tax avoidance as well as assisting companies in making the right decisions regarding their taxation. Research motivation: This study will explain whether corporate social and environmental responsibility that has been carried out in the form of CSR and ESG disclosure can influence a company’s decision to avoid tax and explain whether ROA can influence the relationship between CSR and ESG disclosure on tax avoidance. Research design, approach, and method: This research is a quantitative research using secondary data. The populations are annual reports and sustainability reports of banking sector companies listed on the IDX for the 2018-2022 period. The research sample was determined using a purposive sampling method. The processing of research data is assisted by the SPSS version 29 program. Main findings: Corporate Social Responsibility and ESG Disclosure have no effect on tax avoidance. Financial performance with ROA strengthens the relationship between Corporate Social Responsibility and ESG Disclosure on tax avoidance. Practical/managerial implications: The results of this research can be used as consideration for companies to maintain the company’s image and reputation by not avoiding tax. In addition, the company is expected to be able to manage its assets properly so that the profit generated is maximized so that the company is able to allocate funds not only for CSR and ESG Disclosure but also to fulfill the company’s obligations to pay taxes. Companies must also re-check CSR activities and ESG disclosures that have been carried out to ensure that there are no loopholes for tax avoidance.