Environmental costs, environmental disclosure, and tax avoidance: evidence from mining and energy companies in Indonesia and Australia

Purpose: This study aims to investigate the association between corporate tax avoidance and environmental costs and disclosure in Indonesia and Australia for the research period 2015–2019. This study also analyzes corporate strategies for overcoming public concerns about tax avoidance activities, namely, the trade-off legitimacy and risk reduction strategies, through two mechanisms: the mediation and moderation roles of environmental disclosure on the relationship between environmental costs and tax avoidance activities. Design/methodology/approach: The data consists of 675 and 235 observations for Australia and Indonesia, respectively, which were analyzed quantitatively using panel regression. Findings: The results showed that the trade-off legitimacy or risk reduction strategies are not found to be implemented by companies in Indonesia, while in Australia, corporations use the trade-off legitimacy strategy to reduce risk and overcome the negative impact of tax avoidance activities. The results also provide empirical evidence on the impact of environmental costs on environmental disclosure in both countries. Originality/value: This study contributes to the literature by providing the latest evidence on the role of environmental costs on environmental disclosure, which has rarely been investigated in previous studies.