STRATEGIC TAX PLANNING THROUGH INTELLECTUAL RESOURCES: BOARD EXPERTISE AND INTERNATIONAL DIVERSIFICATION'S MODERATING ROLE

Abstract

This study investigates how board tax expertise and international diversification moderate the relationship between intellectual resources and corporate tax planning effectiveness in Indonesian listed companies, addressing contradictory evidence in prior research. The analysis is based on 524 Indonesian listed firms over the period 2018–2023, employing a dual-method approach. Partial Least Squares Structural Equation Modelling (PLS-SEM) is applied to capture complex construct relationships, while panel regression techniques in STATA 17 are used to ensure econometric robustness. Board expertise data were manually collected from multiple sources, including annual reports, professional association records, and regulatory databases. Board tax expertise is identified as the strongest determinant of tax planning effectiveness, with directors’ tax-specific backgrounds substantially improving planning outcomes. Intellectual capital enhances tax planning efficiency, whereas debt covenant constraints unexpectedly reduce it. International diversification significantly moderates these relationships by amplifying the benefits of intellectual capital and mitigating the adverse effects of covenant constraints. The multidimensional measure of board tax expertise explains 31.2% more variance compared to traditional binary proxies. The study is limited to listed companies and may not generalize to private firms. The findings underscore the importance of recruiting directors with specialized tax expertise—particularly those with regulatory backgrounds—to strengthen firms’ tax planning capabilities. This research introduces and validates a multidimensional framework for assessing board tax expertise that incorporates professional qualifications, experience depth, regulatory background, and current engagement. It demonstrates how scarce tax expertise creates sustainable competitive advantages and reveals how international diversification reshapes domestic tax strategies in emerging markets.