Tunneling Incentive, Debt Covenant and Bonus Mechanism: Transfer Pricing Practices with Tax Minimization as Moderating Variables

Abstract

This study aims to examine several variables that affect transfer pricing, namely tunneling incentives, debt covenants, bonus mechanisms. This study also attempts to examine the role of tax minimization in moderating the relationship between these variables. The sample of this research is mining companies listed on the Indonesia Stock Exchange in 2016-2020. With the purposive sampling method, the data that were successfully processed were 175 observations. Data analysis method using Partial Least Square (PLS). The results of the study show that the variables of tunneling incentive, debt covenant and bonus mechanism affect transfer pricing transaction decisions. Tax minimization is not proven to moderate the relationship between the variables of tunneling incentive, debt covenant, bonus mechanism on transfer pricing transactions.

Keywords: Transfer Price, Bonus Mechanism, Tax Minimization, Tunneling Incentive

DOI: 10.7176/RJFA/13-10-06

Publication date:May 31^st 2022