Exploring the Opportunities for Tax Avoidance Through the Thin Capitalization, Transfer Pricing, and Foreign Ownership
This study examines the implications of Thin Capitalization, Transfer Pricing, and Foreign Ownership on Tax Avoidance within LQ45 companies during the period from 2019 to 2023. A purposive sampling method was employed to obtain a sample of 180 observations from a total of 225 companies. Panel data regression analysis was conducted utilizing Stata 18. The results indicate that Thin Capitalization exerts a negative influence on Tax Avoidance, whereas Transfer Pricing demonstrates a positive effect. Additionally, Foreign Ownership was found to have no significant impact on Tax Avoidance. This study offers a new insight into tax avoidance among Indonesian companies, highlighting how the corporate governance structure can influence tax strategies. It finds that the thin capitalization strategy and transfer pricing of a company are more influenced by management factors than by the structure of its shareholders. Investors should focus on the transparency of company tax policies, as managerial decisions have a greater impact on tax avoidance than ownership structure. Meanwhile, stricter oversight and clearer regulations are needed to prevent tax avoidance and profit shifting.
Authors
- Deden Tarmidi (ORCID: https://orcid.org/0000-0002-4503-0540)
- Kevin Imannuel
Publication Details
- Journal
- Saudi Journal of Economics and Finance
- Published
- 2025-09-19
- DOI
- https://doi.org/10.36348/sjef.2025.v09i09.002
- Primary Topic
- Corporate Taxation and Avoidance
- Type
- article
- Field-Weighted Citation Impact
- 0.00