The Effect of Effective Tax Rate, Multinationality, and Intangible Assets on Transfer Pricing
Abstract
Transfer pricing practices among multinational enterprises remain a persistent concern for tax authorities, yet empirical studies on its determinants report inconsistent findings. Using a quantitative approach and a purposive sampling technique, this study examines how effective tax rate, multinationality, and intangible assets shape transfer pricing among six firms listed on the Indonesia Stock Exchange (IDX) within the Consumer Non-Cyclicals industry from 2019 to 2024, generating 36 firm-year observations evaluated with a fixed effects panel regression in EViews 12. Results indicate that effective tax rate, multinationality, and intangible assets simultaneously influence transfer pricing, although only effective tax rate ( = -0.071, p = 0.037) and intangible assets ( = -0.392, p = 0.001) show a significant partial effect, while multinationality ( = 0.109, p = 0.226) shows none. These findings show that multinationality does not independently drive transfer pricing decisions in this sample, offering a possible explanation for the mixed results reported in prior studies. As a practical implication, tax authorities are advised to strengthen the monitoring of intangible asset valuations and corporate tax strategies to minimize potential transfer pricing abuse.
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