Income Shifting And Tax Avoidance: Evidence In Indonesia
DOI:
https://doi.org/10.22219/jrak.v14i1.30236Keywords:
Income Shifting, Intangible Asset, Multinationality, Tax Avoidance, Transfer PricingAbstract
Purpose: This study aims to examine the effect of income shifting instruments on tax avoidance efforts. The instruments focused on transfer pricing and intangible assets, and the role of multinationality in moderating both
Methodology/approach: The sample selection used a purposive sampling method with a final sample of 110 observations. With secondary data from the company's annual report and financial statements, this study uses Panel Data Regressions and Moderated Regression Analysis (MRA) with Stata 15.
Findings: The results show that transfer pricing has a positive effect and intangible assets have a negative effect on tax avoidance. Also, multinationality only moderates the relationship between transfer pricing and tax avoidance.
Practical implications: This study contributes to helping companies evaluate performance by always complying with tax regulations. Nowadays, there are regulations governing transfer pricing mechanisms and ownership of intangible assets and this study can be an assessment of the regulations effectiveness. Lastly, this study offers empirical evidence to support the discourse of the two pillars of the international tax architecture agreement at the G20 event, where no studies have yet attempted to provide this information.
Originality/value: This study uses multinationality as a moderating variable which in previous studies was widely used as an independent variable. This study also uses Internalization theory to explain tax avoidance in cross-border transaction context, especially related to transfer pricing and intangible assets
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