Corporate tax performance and the COVID-19 pandemic: empirical evidence from Indonesia

Purpose: This study aims to enhance the understanding of the impact of the COVID-19 pandemic on corporate tax performance in the context of a large emerging country like Indonesia. Design/methodology/approach: This study uses a quantitative approach with multiple regression methods on a data set of 2,366 firm-year observations registered on the Indonesia Stock Exchange (IDX) from 2017 to 2022. Findings: The primary empirical findings from the multivariate regressions suggest a positive and significant association between the COVID-19 pandemic and corporate tax performance in Indonesia. In other words, these listed firms have increased their tax avoidance activities during the pandemic. As firms face financial hardships due to the pandemic's effects, they tend to engage in tax avoidance practices to reduce current income tax payments, thereby enhancing their liquidity. In addition, over time, firms have adapted to use various tax policies introduced by the government in response to the pandemic to mitigate the adverse impacts of the crisis. Research limitations/implications: This study draws on a sample solely from one emerging country. Practical implications: The results of this study can aid governments, policymakers, tax authorities and companies in evaluating their strategies concerning preparedness and emergency responses during crises, particularly those caused by pandemics. Originality/value: To the best of the author’s knowledge, this study is considered one of the initial efforts to examine the impact of the COVID-19 pandemic on corporate tax avoidance in an emerging country like Indonesia.