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Does Digital Transformation Reduce Tax Avoidance? The Role of Corporate Governance

Authors

Rika Nur Widiastutik Universitas Negeri Surabaya

DOI:

https://doi.org/10.55927/ijsmr.v4i6.62

Keywords:

digital transformation, tax avoidance, corporate governance, board independence, agency theory

Abstract

This study asks a fairly direct question: does digital transformation actually reduce corporate tax avoidance, and does corporate governance make that effect stronger? Using secondary data from non-financial companies listed on the Indonesia Stock Exchange between 2020 and 2024, the study applies panel data regression to test the proposed hypotheses. Digital transformation is measured through a disclosure index built from digital-related content in annual reports; tax avoidance is captured through the cash effective tax rate; and corporate governance is proxied by board independence. The results show that digital transformation has a negative effect on tax avoidance , firms further along in digital transformation tend to avoid less tax , and that this effect grows stronger as corporate governance improves. In other words, digital transformation works best at curbing tax avoidance when it is backed by solid governance. The study adds to the tax avoidance literature by framing digital transformation as an information-enhancing mechanism that narrows agency problems in tax-related decisions, and it extends agency theory by showing that corporate governance acts as a boundary condition determining how effectively digital transformation promotes transparent, responsible tax behavior.

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