Transfer pricing optimization in the developing economy: A tax consultant’s view

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Abstract

Transfer pricing (TP) is usually used by multinational companies (MNCs) to minimize corporate tax liabilities, using affiliates. This practice involves tax consultants optimizing transfer pricing without violating the tax regulation. Tax consultants contribute to supervising companies to make transparent documentation and transfer pricing policies. This qualitative research explores the tax consultant perspective on companies’ transfer pricing optimization behaviour using planned behaviour theory. Data was collected through interviews, documentation, and observations. This research involves 5 transfer-pricing experts that have experience in transfer pricing issues, in 5 interview sessions. Data triangulation among data sources, written feedback, online interviews, and documentation review was used to ensure validity and reliability. The finding gives an understanding that MNCs in Indonesia optimize transfer pricing by the perception of TP benefit specifically for corporate profit allocation among parties in a different taxation area and tax payment minimization. While business norms, environments, and international regulations of transfer pricing are not fully considered by MNCs in Indonesia. International transfer pricing regulations are not considered the organizational perception of this TP practice. This finding enriches the discussion on the tax consultant perspective, specifically companies’ transfer pricing optimization behaviour to improve guidelines on the TP arm’s length principle (Djaja & Sonny, 2021; Sari, 2021).

Keywords: Transfer Pricing Optimization, Companies Behaviour, Tax Consultant Perspective

Authors’ individual contribution: Conceptualization — H.W.A. and A.J.; Methodology — H.W.A., S.S., and A.J.; Formal Analysis — H.W.A. and A.J.; Investigation — H.W.A.; Writing — Original Draft — H.W.A.; Writing — Review & Editing — H.W.A. and A.J.; Supervision — S.S. and A.J.; Project Administration — H.W.A.; Funding Acquisition — H.W.A.

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

JEL Classification: H25, H26, H71, K34, M48

Received: 04.08.2022
Accepted: 07.04.2023
Published online: 11.04.2023

How to cite this paper: Apriyanti, H. W., Sulaiman, S., & Jamaluddin, A. (2023). Transfer pricing optimization in the developing economy: A tax consultant’s view. Corporate Governance and Organizational Behavior Review, 7(2), 190–196. https://doi.org/10.22495/cgobrv7i2p17