Open Access
Article
SciPap-2361
How Political Connections Shape Sustainability's Impact on Tax Aggressiveness in Indonesia
by
Nora Hilmia Primasari 1,* 
, Faisal Faisal 2 and Siti Mutmainah 3
1 Faculty of Economics and Business, Universitas Diponegoro and Universitas Budi Luhur, Jl. Ciledug Raya, Jakarta 12260, Indonesia
2 Faculty of Economics and Business, Universitas Diponegoro, Jl Erlangga, Semarang 50275, Indonesia
3 Faculty of Economics and Business, Universitas Diponegoro, Jl Erlangga, Semarang 50275, Indonesia
* Authors to whom correspondence should be addressed.
Abstract: This study examines the effect of corporate sustainability on tax aggressiveness, with political connections as a moderating variable. The population of this study consists of companies listed on the Indonesia Stock Exchange (IDX) from 2017 to 2022. The research method used is panel data analysis with the Moderated Regression Analysis (MRA) approach. The results indicate that corporate sustainability positively influences tax aggressiveness (consistent with agency theory). While political connections significantly increase tax aggressiveness, their moderating effect not only attenuates but completely inverts the positive sustainability-tax aggressiveness relationship, resulting in a negative association (aligning with legitimacy theory). These findings suggest that sustainability reporting may serve as a facade for legitimacy, whereas political connections present both advantages and risks. This study makes theoretical contributions by agency theory and legitimacy perspectives to examine corporate behaviour in emerging markets, particularly Indonesia, while offering practical implications for enhancing regulatory oversight of sustainability disclosures and politically affiliated firms.
Keywords: Indonesia., Tax Aggressiveness, Corporate Sustainability, Political Connections, Agency Theory Legitimacy Theory
JEL classification: H26 - Tax Evasion and Avoidance, P48 - Political Economy • Legal Institutions • Property Rights • Natural Resources • Energy • Environment • Regional Studies, Q56 - Environment and Development • Environment and Trade • Sustainability • Environmental Accounts and Accounting • Environmental Equity • Population Growth
Received: 18 August 2025 / Revised: 29 September 2025 / Accepted: 31 October 2025 / Published: 14 November 2025
