The relationship between sales growth, profitability, and tax avoidance

The relationship between sales growth, profitability, and tax avoidance

Monday, 05 February 2024 | Mohammad Fawzi Shubita
This study examines the relationship between sales growth, profitability, and tax avoidance strategies among Jordanian industrial firms listed on the Amman Stock Exchange from 2010 to 2020. The research uses a mixed-methods approach, combining quantitative regression analysis with qualitative assessments of corporate tax strategies. The key variables analyzed are tax avoidance, return on assets (ROA), sales, and firm size. The findings reveal a strong negative relationship between ROA and tax avoidance, indicating that higher profitability is associated with lower tax avoidance. Firm size is found to have a marginally significant positive relationship with tax avoidance, suggesting that larger firms may have more resources for tax planning. However, sales growth does not show a statistically significant association with tax avoidance. The study highlights the central role of profitability in shaping tax avoidance strategies, with larger firms being more inclined toward tax planning. The results suggest that while profitability and firm size influence tax avoidance, sales growth alone does not significantly affect it. The study also underscores the need for further research into industry-specific factors, longitudinal analyses, and the impact of corporate governance on tax behavior. The findings contribute to the understanding of corporate tax strategies in the Jordanian context and provide insights for policymakers and businesses in navigating tax planning and regulatory environments.This study examines the relationship between sales growth, profitability, and tax avoidance strategies among Jordanian industrial firms listed on the Amman Stock Exchange from 2010 to 2020. The research uses a mixed-methods approach, combining quantitative regression analysis with qualitative assessments of corporate tax strategies. The key variables analyzed are tax avoidance, return on assets (ROA), sales, and firm size. The findings reveal a strong negative relationship between ROA and tax avoidance, indicating that higher profitability is associated with lower tax avoidance. Firm size is found to have a marginally significant positive relationship with tax avoidance, suggesting that larger firms may have more resources for tax planning. However, sales growth does not show a statistically significant association with tax avoidance. The study highlights the central role of profitability in shaping tax avoidance strategies, with larger firms being more inclined toward tax planning. The results suggest that while profitability and firm size influence tax avoidance, sales growth alone does not significantly affect it. The study also underscores the need for further research into industry-specific factors, longitudinal analyses, and the impact of corporate governance on tax behavior. The findings contribute to the understanding of corporate tax strategies in the Jordanian context and provide insights for policymakers and businesses in navigating tax planning and regulatory environments.
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[slides and audio] The relationship between sales growth%2C profitability%2C and tax avoidance