The Effect of Liquidity and Profitability on Tax Avoidance: The Moderating Role of Green Accounting

Purpose: This study aims to examine the effect of liquidity, solvency, and profitability on tax avoidance and to analyze the moderating role of Green Accounting in the relationship between financial performance indicators and tax avoidance among companies listed on the Indonesia Stock Exchange (IDX).

Research Methodology: This study uses a quantitative approach with secondary data from basic materials sector companies listed on the IDX during 2020–2024. The data were analyzed using multiple regression and moderated regression analysis based on 75 firm-year observations.

Results: The findings indicate that liquidity has a positive and significant effect on tax avoidance, while profitability has a negative and significant effect. Solvency does not significantly influence tax avoidance. Furthermore, Green Accounting significantly weakens the effects of liquidity and profitability on tax avoidance but does not moderate the relationship between solvency and tax avoidance. The moderated model demonstrates higher explanatory power with an Adjusted R² value of 70.1%.

Conclusions: Green Accounting plays an important role in encouraging corporate transparency and reducing aggressive tax avoidance behavior by integrating environmental responsibility into financial decision-making.

Limitations: This study is limited to basic materials sector companies, a five-year observation period, and the use of PROPER scores as a proxy for Green Accounting.

Contributions: This research contributes by expanding tax avoidance literature through the integration of environmental accounting perspectives and providing insights for companies, regulators, and investors regarding the role of sustainable accounting practices in shaping responsible tax strategies.