The Effect of Transfer Pricing Aggressiveness on Tax Avoidance with Intangible Asset Intensity as a Moderator

Abstract

This study investigates the effect of transfer pricing aggressiveness on tax avoidance, where intangible asset intensity is considered as moderating variable, in companies engaged in plantation and food business, listed in Indonesia Stock Exchange (IDX) for year period of 2020 to 2024. The approach taken to this study is explanatory research method, involving secondary data obtained from audited annual consolidated financial statements. Data collection involved purposive sampling technique, which yielded 30 observations from six companies. CETR is used as proxy for tax avoidance; transfer pricing aggressiveness is proxied as ratio of related party transactions to total assets; intangible asset intensity is proxied as ratio of intangible assets to total assets; and firm size as control variable. The hypotheses testing was done through Moderated Regression Analysis (MRA). The results showed transfer pricing aggressiveness positively affects CETR, meaning more related-party transactions intensity leads to higher cash-basis tax payments and, moreover, to lesser tax avoidance. Intangible asset intensity does not significantly affect CETR and does not moderate the relationship between transfer pricing aggressiveness and tax avoidance. Finally, the firm size positively affects CETR. Therefore, it is confirmed that transaction-related parties and intangible asset ownerships are not necessarily used as tax avoidance techniques among Indonesian publicly held firms.The study contributes to transfer pricing and corporate taxation literature by emphasising importance of institutional context, regulatory oversight, and sector characteristics in interpreting correlation between transfer pricing and tax avoidance.
Keywords: transfer pricing; tax avoidance; cash effective tax rate; intangible assets; moderated regression analysis.