The effect of liquidity on tax avoidance: The moderating role of leverage

Authors

  • I Gusti Ayu Nadya Utami Dewi Wibawa Udayana University, Denpasar, Indonesia
  • A.A.G.P. Widanaputra Udayana University, Denpasar, Indonesia
  • Ni Luh Gede Krisna Dewi Udayana University, Denpasar, Indonesia
  • Henny Triyana Hasibuan Udayana University, Denpasar, Indonesia

Keywords:

Liquidity, Leverage, Tax Avoidance, CETR, MRA

Abstract

This study aims to analyze the effect of liquidity on tax avoidance and examine the role of leverage in moderating the relationship between liquidity and tax avoidance in Non-Cyclical Consumer Goods Sector companies listed on the Indonesia Stock Exchange during the 2021–2025 period. This study employs a quantitative approach using secondary data obtained from annual reports and financial statements. The sample was selected using a purposive sampling method, resulting in 64 companies with a total of 320 observations. Tax avoidance was measured using the Cash Effective Tax Rate (CETR), liquidity was measured using the Current Ratio (CR), and leverage was measured using the Debt-to-Equity Ratio (DER). Data were analyzed using Moderated Regression Analysis (MRA) with SPSS version 26.0. The results indicate that liquidity has a negative and significant effect on CETR, suggesting a higher tendency for tax avoidance. Furthermore, leverage is proven to moderate and strengthen the negative effect of liquidity on CETR. These findings demonstrate that a company’s liquidity condition and leverage level play an important role in explaining its tendency to engage in tax avoidance practices. The implications of this study suggest that liquidity and leverage should be managed optimally to maintain a balance between financial strategies and tax compliance. In addition, the combination of liquidity and leverage may serve as an important consideration for investors, creditors, and tax authorities in identifying corporate tax avoidance risks.

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Published

2026-06-18

How to Cite

Wibawa, I. G. A. N. U. D., Widanaputra, A., Dewi, N. L. G. K., & Hasibuan, H. T. (2026). The effect of liquidity on tax avoidance: The moderating role of leverage. Tennessee Research International of Social Sciences, 8(1), 311–320. Retrieved from http://triss.org/index.php/journal/article/view/155

Issue

Vol. 8 No. 1: January-June 2026

Section

Research Articles

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