Financial Determinants of Tax Avoidance: Insight from the Telecom Sector with Profitability Moderation

Understanding the financial determinants for tax avoidance in the telecommunications sector is crucial, particularly as profitability can affect how companies manage their taxes.Therefore, this research study aims to explore the relationship between financial drivers such as capital intensity (CI), sales growth (SG), and leverage (LEV) on tax avoidance (TA), as well as examining the moderating role of profitability (PRO).The dependent variable, tax avoidance, is determined by the effective tax rate.Capital intensity, sales growth, and leverage are the independent variables.The study uses return on assets (ROA) as a moderating variable that represents profitability.The study used quantitative secondary data that was gathered from the 2010-2023 annual reports of four telecom firms that were listed on Bursa Malaysia.A purposive sampling technique was used to collect data from the company's annual reports.OLS regression was used in the study in addition to the fixed effect method (FEM).The study findings revealed that capital intensity and leverage are important factors in determining tax avoidance.Similarly, profitability strongly moderates the association between capital intensity and tax avoidance based on the findings for the moderation effect.Agency theory, which indicates that there exist conflicts of interest between the government (principal) and businesses or taxpayers (agents), validates the findings of this study.The findings of this study can help companies make decisions about improved policies related to corporate tax avoidance and also help the firms to determine important factors that help in reducing their tax burden.