The Effect of Transfer Pricing, Capital Intensity, and Earnings Management on Tax Avoidance

Abstract

Taxation is a mechanism for collecting state revenues and an instrument of a country's fiscal policy. However, tax is a burden for the company. So the company's management is interested in maximising profits by avoiding taxation. This study aims to determine the effect of transfer pricing, capital intensity, and earnings management on tax avoidance in manufacturing companies listed on the Indonesia Stock Exchange for the 2015–2019 period. The determination of the research sample was made using the purposive sampling method, with a total sample of 66 companies, to obtain 330 data. The software used is E-views 9. Tax avoidance was proxied by the cash effective tax rate; transfer pricing was proxied by the ratio of related party sales transactions to total sales; capital intensity was proxied by the percentage of total fixed assets to total company assets, and earnings management was proxied by the modified Jones discretionary accrual model. The results show that transfer pricing, capital intensity, and earnings management significantly affect tax avoidance simultaneously or partially.