The Influence of Financial Distress, Profitability, and Leverage on Tax Avoidance

This study aims to examine the effect of financial distress, profitability, and leverage on tax avoidance in manufacturing companies listed on the Indonesia Stock Exchange (IDX) during the 2022–2024 period. Tax avoidance is proxied using the Cash Effective Tax Rate (CETR). This research uses a quantitative approach with panel data regression analysis through the Random Effect Model (REM), processed using EViews software. The results show that financial distress has no significant effect on tax avoidance, suggesting that financially distressed companies do not necessarily adopt aggressive tax planning strategies. In contrast, profitability and leverage both have a positive and significant effect on tax avoidance, indicating that highly profitable firms and those with higher debt levels are more likely to engage in tax avoidance. The adjusted coefficient of determination (Adjusted R²) shows that the three variables explain approximately 12.16% of the variation in tax avoidance, with the remaining percentage explained by other factors not included in the model. These findings highlight the importance of monitoring profitable and highly leveraged firms to minimize potential tax revenue losses.