The relationship between sales growth, profitability, and tax avoidance

  • Received October 14, 2023;
    Accepted January 12, 2024;
    Published February 5, 2024
  • Author(s)
  • DOI
    http://dx.doi.org/10.21511/im.20(1).2024.10
  • Article Info
    Volume 20 2024, Issue #1, pp. 113-121
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This work is licensed under a Creative Commons Attribution 4.0 International License

The study aims to examine the intricate interplay between sales growth, profitability, and tax avoidance strategies adopted by firms. Through an analysis of a diverse dataset spanning multiple industries and regions, this study investigates how sales growth influences a firm’s marketing approach to tax avoidance and its subsequent impact on profitability. The sample is Jordanian industrial firms listed on the Amman Stock Exchange for the study period between 2010 and 2020. Four critical variables used in the dataset are tax avoidance, return on assets, sales, and size. It employs a mixed-methods approach, including quantitative regression analysis and qualitative assessments of corporate tax strategies. The study results reveal a strong negative relationship between ROA and tax avoidance; for every unit increase in ROA, tax avoidance decreases by 0.198 units. Sales, however, do not exhibit a statistically significant association with tax avoidance. Firm size is an additional predictor with a marginally significant direct link with tax avoidance (β = 0.042, p = 0.049). This study highlights the central role of profitability in shaping tax avoidance strategies, with larger firms marginally more inclined toward tax planning.

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    • Table 1. Study variables
    • Table 2. Descriptive results
    • Table 3. Pearson correlation matrix
    • Table 4. The first model
    • Table 5. The second model
    • Conceptualization
      Mohammad Fawzi Shubita
    • Data curation
      Mohammad Fawzi Shubita
    • Formal Analysis
      Mohammad Fawzi Shubita
    • Funding acquisition
      Mohammad Fawzi Shubita
    • Investigation
      Mohammad Fawzi Shubita
    • Methodology
      Mohammad Fawzi Shubita
    • Resources
      Mohammad Fawzi Shubita
    • Writing – original draft
      Mohammad Fawzi Shubita
    • Writing – review & editing
      Mohammad Fawzi Shubita