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All Journal Mercatura Lumina: Journal of Management, Entrepreneurship, and Tourism
Helmy Aulia Rachman
Brawijaya University

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The Effect of Temporary Book-Tax Differences, Permanent Book-Tax Differences, and Profitability on Tax Avoidance Shakila Nur Atifa Rambe; Helmy Aulia Rachman
Journal of Management, Entrepreneurship, and Tourism Vol. 1 No. 3 (2026): : August: Mercatura Lumina: Journal of Management, Entrepreneurship, and Touris
Publisher : CV SCRIPTA INTELEKTUAL MANDIRI

Show Abstract | Download Original | Original Source | Check in Google Scholar | DOI: 10.65310/w9cgqw39

Abstract

This study aims to examine the effects of temporary book-tax differences, permanent book-tax differences, and profitability on tax avoidance among banking companies listed on the Indonesia Stock Exchange during 2022–2024. A quantitative approach was employed using panel data regression and purposive sampling, resulting in 111 firm-year observations from 37 banking companies. Tax avoidance was measured using the Effective Tax Rate (ETR), in which a lower ETR indicates a higher level of tax avoidance. The panel model selection tests, consisting of the Chow, Hausman, and Lagrange Multiplier tests, identified the Random Effects Model as the most appropriate estimation model. The results show that temporary book-tax differences have no significant effect on tax avoidance, indicating that temporary differences do not systematically explain tax avoidance behavior in the banking sector. In contrast, permanent book-tax differences have a significant negative effect on tax avoidance, indicating that greater permanent differences are associated with higher ETR and consequently lower tax avoidance. Profitability has a significant positive effect on tax avoidance, suggesting that more profitable banking companies tend to have greater incentives and capacity to undertake tax planning that reduces their effective tax burden. The findings demonstrate that tax avoidance is not necessarily determined by the magnitude of differences between accounting and taxable income, but depends on the nature of those differences and the financial characteristics of the company. These findings contribute to understanding tax avoidance behavior in the regulated banking sector.  
Co-Authors Shakila Nur Atifa Rambe