Analysis of the Impact of Tax Planning on Corporate Profitability

This study examines how tax planning influences corporate profitability by considering both direct financial effects and the indirect mechanism through firm growth. In the context of increasing regulatory scrutiny and strategic financial management, tax planning has shifted from a compliance function to a managerial decision that potentially enhances firm performance. Using a quantitative explanatory design, this research analyzes panel data from publicly listed non-financial firms based on secondary data derived from audited financial statements. Tax planning is proxied by Effective Tax Rate (ETR) and Cash Effective Tax Rate (CETR), profitability is measured by Return on Assets (ROA), and Firm Size is tested as a mediating variable. Panel regression and Sobel mediation tests are employed to examine the relationships among variables. The findings indicate that ETR and CETR significantly affect Firm Size, and Firm Size significantly affects ROA. Tax planning also has a direct effect on profitability, while Firm Size partially mediates this relationship. These results demonstrate that tax planning enhances profitability not only through increased after-tax income but also through asset accumulation that strengthens the firm’s capacity to generate returns. The study concludes that tax planning functions as a strategic financial instrument that supports both corporate growth and profitability when implemented within legal and sustainable boundaries.

1. Adthajak, P., Poonpool, N., & Bhongchirawattana, U. (2025). The mediating effect of sustainability disclosure on the impact of proactive tax planning on firm value: Empirical evidence from ESG100 index. Journal of Project Management. https://doi.org/10.5267/j.jpm.2025.8.005
2. Čavlin, M., Bugar, D., & Đurović, M. (2025). Strategic tax optimization models in global business structures. Ekonomist. https://doi.org/10.46793/ekonomist4.1.3c
3. Duhoon, A., & Singh, M. (2023). Corporate tax avoidance: A systematic literature review and future research directions. LBS Journal of Management & Research. https://doi.org/10.1108/lbsjmr-12-2022-0082
4. Hidayah, N., Susena, K., & Sahdiya, B. (2025). The effect of tax planning and deferred tax on financial performance. Journal of Law, Social Science, and Management Review. https://doi.org/10.70963/jlsmr.v1i2.187
5. Jin, Q., & Fu, Y. (2024). Tax strategy and international financial management of multinational companies. Applied Mathematics and Nonlinear Sciences, 9. https://doi.org/10.2478/amns-2024-1464
6. Machkhoshvili, M., & Berishvili, V. (2025). Designing global tax strategies: Offshore jurisdictions, double tax treaty use, and corporate value. Path of Science. https://doi.org/10.22178/pos.120-35
7. M, K., S, S., S, S., & Kumar, T. (2025). Corporate income tax and business investment decisions: A strategic and financial perspective. International Journal of Multidisciplinary Research in Science, Engineering and Technology. https://doi.org/10.15680/ijmrset.2025.0804082
8. Ng, S. (2025). Tax planning strategies and their economic impact on corporate financial performance. JEMSI (Jurnal Ekonomi, Manajemen, dan Akuntansi). https://doi.org/10.35870/jemsi.v11i5.4563
9. Nurmilah, N., & Saga, B. (2025). The influence of tax planning, capital structure and sales growth on company value. Journal of Accounting Management Business and International Research. https://doi.org/10.57235/jambuair.v4i1.3434
10. Santoso, R., Harefa, T., & Mukhtaruddin, M. (2025). Systematic literature review: The effect of tax planning and tax management on financial performance. Dinasti International Journal of Management Science. https://doi.org/10.38035/dijms.v6i4.4470
11. Santoso, S., & Pratiwi, D. (2023). The influence of tax planning, leverage, profitability, and firm size on firm value (Empirical study of food and beverage sub-sector manufacturing companies listed on the Indonesia Stock Exchange in the 2019–2021 period). Journal of Accounting and Finance Management. https://doi.org/10.38035/jafm.v4i1.191
12. Sun, J., Makosa, L., Yang, J., Yin, F., & Sitsha, L. (2021). Does corporate tax planning mitigate financial constraints? Evidence from China. International Journal of Finance & Economics. https://doi.org/10.1002/ijfe.2433
13. Terna, K., Ene, E., & Ene, J. (2025). Impact of tax aggressiveness on the financial performance of listed insurance firms in Nigeria. Gombe Journal of Administration and Management (GJAM). https://doi.org/10.64290/gjam.v7i1.1250
14. Yunira, H., Susilawaty, T., Kesuma, S., & Muda, I. (2023). A systematic literature review on corporate tax planning. International Journal of Social Service and Research. https://doi.org/10.46799/ijssr.v3i7.490
15. Zhen, D. (2025). The tax planning for corporate income tax under the background of tax reduction and fee reduction. Critical Humanistic Social Theory. https://doi.org/10.62177/chst.v2i1.203