The Effects of Taxation toward Decision of Transfer Pricing on Multi-National Companies in Indonesia

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Hendro Lukman et al.


In globalization today, business is no longer limited by distance, time, and place. In order to maintain growth, multinational companies need to do production efficiency by developing international supply chain. Therefore, companies conduct inhouse production or in other countries that can produce products at cheaper prices than producing in origin country so that they can divert profits or optimize tax benefits. The purpose of this study is to determine the effects of tax rates and tax regulations on ethical behavior as a moderation of transfer pricing decisions carried out by multi-national companies in Indonesia. From 30 multi-national companies in Indonesia used as samples that were processed using Partial Least Square, shows that tax regulations have no negative effect to the management in making the decision of transfer pricing, but tariff and ethics have affect positively, as well as when the tax rule and tax tariff are mediated by ethics.

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