Corporate Tax Avoidance and Investment Efficiency: Evidence from the Enforcement of Tax Amnesty in Indonesia

Agnes Aurora Ngelo, Yani Permatasari, Iman Harymawan, Nadia Anridho, Khairul Anuar Kamarudin

Research output: Contribution to journalArticlepeer-review

5 Citations (Scopus)


This study examines the investment efficiency of firms engaging in tax avoidance in Indonesia. We test 2064 firm-year observations of Indonesian listed firms from 2010–2019 and document a positive relationship between tax avoidance and investment efficiency. This study also considers a unique setting of Indonesia as one of the few developing countries that implement tax amnesty. Thus, we test the variables in the period of prime tax amnesty implementation in Indonesia. We document significant results only in the firms that did not participate in tax amnesty during the implementation period. Nevertheless, the results are consistent in several alternative measurements and robust to the Propensity Score Matching regression to handle potential endogeneity. In addition, we discover that the investment efficiency of tax avoidance is salient in both firms prone to underinvestment and overinvestment. These findings extend the literature on tax avoidance and corporate investment. Based on the results, tax authorities should be stricter in handling tax avoidance practices because this practice has a cost-benefit trade-off that allows firms to obtain benefits at the expense of the state’s income if not managed properly.

Original languageEnglish
Article number251
Issue number10
Publication statusPublished - Oct 2022


  • investment efficiency
  • tax amnesty participation
  • tax avoidance
  • tax evasion


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