Redefining Corporate Governance: The Role of Sustainability Performance in Shaping Tax Avoidance Arry Irawan(a*), Sulistia Suwondo(a), Endah Dwi Kusumastuti(a), Setiawan(a)
a) Department of Accounting, Politeknik Negeri Bandung, Jl. Gegerkalong Hilir, Desa Ciwaruga, Bandung 40559, Indonesia
*arry.irawan[at]polban.ac.id
Abstract
This study examines the influence of the Board of Directors (BDO) and the Board of Commissioners (BCO) on tax avoidance (ETR), as well as the moderating role of sustainability performance in these relationships. This research employs a purposive sampling technique, with a sample of 159 companies listed on the Indonesia Stock Exchange over the period of 2018-2022. Data were sourced from the annual reports of companies published on the Indonesia Stock Exchange and analyzed using Structural Equation Modeling-Partial Least Squares (SEM-PLS). The results reveal that the direct relationship between BDO and tax avoidance is not significant, indicating that the role of BDO in tax decision-making does not have a direct impact. However, sustainability performance is found to significantly moderate the relationship between BDO and tax avoidance, suggesting that companies with better sustainability performance exhibit lower tax avoidance. Conversely, the composition of BCO demonstrates a significant impact on tax avoidance, where an increase in the number of board members is associated with reduced tax avoidance. Additionally, sustainability performance significantly moderates the relationship between BCO and tax avoidance, enhancing the positive influence of BCO when companies have high sustainability performance.
