The effect of sustainability reporting, transfer pricing, and deferred tax expense on tax avoidance in multinational manufacturing sector companies

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Abstract

Transfer pricing is a company’s decision to determine the transfer of the prices of goods, services, and transactions implemented by the company (Choi et al., 2020). This study aimed to examine the effect of sustainability reporting, transfer pricing, and deferred tax expense on tax avoidance. This research was a descriptive quantitative study in which data were collected, processed, presented, and analyzed quantitatively (numbers) and descriptively (sentence description). This study was conducted in 35 multinational companies in the manufacturing sector listed on the Indonesia Stock Exchange (IDX), which were selected purposively. The observation period in this study was from 2016 to 2020. The analysis used in this research was panel data regression. The results showed that transfer pricing had an effect on tax avoidance, which means that if the company carries out transfer pricing, the company is indicated to be carrying out tax avoidance. Sustainability reporting and deferred tax expense cannot affect tax avoidance, which means that if companies carry out sustainability reporting and have a deferred tax expense they are not indicated to do tax avoidance.

Keywords: Sustainability Reporting, Transfer Pricing, Deferred Tax Expense, Tax Avoidance

Authors’ individual contribution: Conceptualization — M. and I.; Investigation — M.A.D. and D.L.W.; Resources — M. and A.P.; Writing — M. and S.F.P.

Declaration of conflicting interests: The Authors declare that there is no conflict of interest.

JEL Classification: M1, M2, M4, G3, G4

Received: 21.01.2023
Accepted: 08.01.2024
Published online: 11.01.2024

How to cite this paper: Iriyadi, Meiryani, Darmawan, M. A., Warganegara, D. L., Purnomo, A., & Persada, S. F. (2024). The effect of sustainability reporting, transfer pricing, and deferred tax expense on tax avoidance in multinational manufacturing sector companies. Journal of Governance & Regulation, 13(1), 50–62. https://doi.org/10.22495/jgrv13i1art5