THE EFFECT OF PROFITABILITY AND TAX MINIMIZATION ON TRANSFER PRICINGMODERATED BY FIRM SIZE (AN EMPIRICAL STUDY ON MINING COMPANIES
Abstract
This study aims to examine the effect of profitability and tax minimization on transfer pricing, with firm size serving as a moderating variable, in mining companies listed on the Indonesia Stock Exchange (IDX) during the 2020–2022 period. The research employed a quantitative approach using secondary data obtained from the audited annual financial statements of mining companies listed on the IDX. The sample consisted of 12 companies (36 firm-year observations) selected through purposive sampling. Data were analyzed using Partial Least Squares–Structural Equation Modeling (PLS-SEM), including descriptive statistics, measurement model evaluation, structural model assessment, and hypothesis testing. The results indicate that profitability has a significant negative effect on transfer pricing, while tax minimization has no significant effect on transfer pricing. Firm size has a significant negative direct effect on transfer pricing and significantly moderates the relationship between profitability and transfer pricing. However, firm size does not moderate the relationship between tax minimization and transfer pricing. The coefficient of determination (R²) shows that profitability, tax minimization, and firm size explain 36.6% of the variation in transfer pricing. In conclusion, transfer pricing practices in Indonesian mining companies are primarily influenced by profitability and firm size, whereas tax minimization does not significantly affect transfer pricing, either directly or through the moderating role of firm size.
Keywords: Firm Size, Profitability, Tax Minimization, Transfer Pricing
References
Amalo, V. G., & Hardi, H. (2024). Nickel Ore Export Ban Policy: A Review of International Law and Economic Impacts in Indonesia. Causa: Journal of Law and Citizenship, 2(3), 1-10. https://doi.org/10.3783/causa.v2i3.1883
Aqilla, A., & Sisdianto, E. (2024). Tax Avoidance Strategies and Their Implications for Tax Revenue Efficiency: A Case Analysis in the Multinational Industry. Jurnal Ilmiah Manajemen Ekonomi Dan Akuntansi (JIMEA), 1(3), 7-17. https://doi.org/10.62017/jimea.v1i3.1182
Densiska, R. A., & Kunawangsih, T. (2023). The Effect of Tax Minimization, Leverage, and Firm Size on Transfer Pricing Decisions Moderated by COVID-19 in Manufacturing Sector Companies Listed on IDX in 2016–2021. Mufakat: Journal of Economics, Management and Accounting, 2(4). https://doi.org/10.572349/mufakat.v2i4.1050
Hutapea, I. V. R., & Herawaty, V. (2020). The Effect of Earnings Management, Leverage, and Profitability on Tax Avoidance with Firm Size as a Moderating Variable (Empirical Study on Manufacturing Sector Companies Listed on the Indonesia Stock Exchange 2016–2018). In Proceedings of the National Seminar PAKAR (pp. 2-18). https://doi.org/10.25105/pakar.v0i0.6840
Ilmi, F., & Prastiwi, D. (2020). The Effect of Profitability, Corporate Innovation, and Firm Size on Transfer Pricing Aggressiveness. Jurnal Akuntansi Unesa, 8(2), 1-9.
Junaidi, A., & Zs, N. Y. (2020). The Effect of Taxes, Tunneling Incentive, Debt Covenant, and Profitability on Transfer Pricing Decisions. Jurnal Ilmiah Akuntansi, Manajemen Dan Ekonomi Islam (JAM-EKIS), 3(1). https://doi.org/10.36085/jam-ekis.v3i1.530
Karunia, P. A. R. (2020). This is Transfer Pricing as a Barrier to Increasing the Tax Ratio. Retrieved from https://www.pajak.go.id/id/artikel/ini-dia-transfer-pricing-penghambat-kenaikan-rasio-pajak
Liza, A. (2020). Tax Burden, Tunneling Incentive, Exchange Rate, Firm Size, and Profitability on Transfer Pricing of Manufacturing Companies. Journal of Business and Economics (JBE) UPI YPTK, 5(2), 8-13. https://doi.org/10.35134/JBEUPIYPTK.V5I2.110
Madani, D. N., & Djohar, C. (2024). The Effect of Transfer Pricing, Independent Board of Commissioners, and Foreign Ownership on Tax Avoidance (Empirical Study on Primary Consumer Goods Industry Companies Listed on IDX in 2018–2022). Jurnal Nusa Akuntansi, 1(1), 92-109. http://dx.doi.org/10.62237/jna.v1i1.7
Maharani, L. S., Abbas, D. S., & Aulia, T. Z. (2023). The Effect of Tax Minimization and Audit Tenure on Transfer Pricing. SANTRI: Journal of Islamic Economics and Finance, 1(6), 53-62. https://doi.org/10.61132/santri.v1i6.100
Maharani, N. E. (2022). Revisiting: The PT Adaro Case Suspected of Involvement in Transfer Pricing and Its Relation to PSAK No. 7. Retrieved from https://www.tribunsumbar.com/menilik-kembali-kasus-pt-adaro-yang-diduga-terlibat-transfer-pricing-dan-kaitannya-dengan-psak-no-7 (March 21, 2024).
Makhmudah, N. F., & Djohar, C. (2023). The Effect of Tax Minimization, Effective Tax Rate, and Exchange Rate on Transfer Pricing. Revenue Journal: Jurnal Ilmiah Akuntansi, 3(2), 429-441. http://dx.doi.org/10.46306/rev.v3i2.160
Maulina, I., Ulfah, A. K., Rofizar, H., Kamal, H., & Nasution, M. S. (2021). The Effect of Bonus Mechanism and Multinationality on Transfer Pricing Decisions in Manufacturing Companies Listed on IDX. Journal of Education, Humaniora and Social Sciences (JEHSS), 4(2), 1246-1256. http://dx.doi.org/10.34007/jehss.v4i2.808
Mineri, M. F., & Paramitha, M. (2021). The Effect of Taxes, Tunneling Incentive, Bonus Mechanism, and Profitability on Transfer Pricing. Jurnal Analisa Akuntansi Dan Perpajakan, 5(1), 35-44. https://dx.doi.org/10.25139/jaap.v5i1.3638
Muzal, A., & Lastanti, H. S. (2024). The Effect of Profitability, Exchange Rate, Corporate Innovation, and Bonus Mechanism on Transfer Pricing Aggressiveness. Jurnal Syntax Admiration, 5(2), 650-658. https://doi.org/10.46799/jsa.v5i2.999
Naili, G. I., Manrejo, S., & Faeni, D. P. (2024). Tax Burden, Bonus Mechanism, and Firm Size on Transfer Pricing in Mining Sector Companies (IDX 2018–2022). SENTRI: Jurnal Riset Ilmiah, 3(3), 1346-1359. https://doi.org/10.55681/sentri.v3i3.2457
Napitupulu, I. H., Situngkir, A., & Arfanni, C. (2020). The Effect of Transfer Pricing and Profitability on Tax Avoidance. Kajian Akuntansi, 21(2), 126-141. http://dx.doi.org/10.29313/ka.v21i2.6737
Oktaviyoni, A. (2024). Tax Revenue Statistics 2023 in Figures. Retrieved from https://pajak.go.id/index.php/id/artikel/statistik-penerimaan-pajak-tahun-2023-dalam-angka (March 22, 2024).
Ortax. (2023). Minister of Finance Regulation Number: 172 of 2023. Retrieved from https://datacenter.ortax.org/ortax/aturan/show/25467 (March 20, 2024).
Pandia, S. E. N. S., & Gultom, R. (2022). Firm Size as a Moderator of the Effect of Tax Minimization, Debt Covenant, Audit Quality, and Exchange Rate on Transfer Pricing. Jurnal Ilmiah Methonomi, 8(1), 1-18. https://doi.org/10.46880/methonomi.Vol8No1.pp1-18
Putri, W. C., & Lindawati, L. (2023). The Effect of Tax Minimization, Exchange Rate, and Tunneling Incentive on Transfer Pricing Decisions. Scientific Journal of Reflection: Economic, Accounting, Management and Business, 6(1), 195-204. https://doi.org/10.37481/sjr.v6i1.634
Rustian, N. R., & Syafri, S. (2023). The Effect of Firm Size, Leverage, Foreign Ownership, and Profitability on Transfer Pricing in Oil, Gas & Coal Sector Companies Listed on IDX. Akuntansi, 2(3), 268-283. https://doi.org/10.55606/akuntansi.v2i3.344
Sa'diah, F., & Afriyenti, M. (2021). The Effect of Tax Avoidance, Firm Size, and Independent Board of Commissioners on Transfer Pricing Policy. Jurnal Eksplorasi Akuntansi, 3(3), 501-516. https://doi.org/10.24036/jea.v3i3.385
Salsabilla, S., & Nurdin, F. (2023). The Effect of Transfer Pricing, ROA, Leverage, and Earnings Management on Tax Avoidance in IDX 2017–2021. Jurnal Ilmiah Akuntansi Peradaban, 9(1), 151-174. http://dx.doi.org/10.24252/jiap.v9i1.35353
Sari, A., Khasanah, U., & Pramukty, R. (2023). The Effect of Tax Burden, Foreign Ownership, and Bonus Mechanism on Transfer Pricing. Jurnal Manajemen, Akuntansi dan Logistik (JUMATI), 1(3), 458-467.
Sari, D. A. M., & Djohar, C. (2022). The Effect of Profitability, Debt Covenant, and Bonus Mechanism on Transfer Pricing: An Empirical Study on Basic Materials Sector Companies Listed on IDX. Yudishtira Journal: Indonesian Journal of Finance and Strategy Inside, 2(2), 227-243.
Silvia, A. (2021). The Effect of Net Profit Margin (NPM), Return on Assets (ROA), Return on Equity (ROE), and Debt to Equity Ratio (DER) on Stock Prices in Manufacturing Companies Listed on IDX in 2014–2016. Journal of Trends Economics and Accounting Research, 1(3), 107-122.
Sintiana, S., & Purnomo, L. I. (2023). Determinants of Companies Engaging in Transfer Pricing Moderated by Firm Size: (Energy Companies 2017–2021). Mufakat: Journal of Economics, Management and Accounting, 2(4), 252-268.
Siregar, I. M., & Yunira, H. (2024). The Effect of Corporate Income Tax (CIT), Foreign Ownership, and Firm Size on Transfer Pricing in Coal Mining Companies Listed on IDX 2018–2022. Innovative: Journal of Social Science Research, 4(2), 4322-4338.
Sitorus, R. (2020). The Effect of Transfer Pricing and Sales Growth on Tax Avoidance with Profitability as a Moderating Variable. Media Akuntansi Perpajakan, 5(1), 18-31. https://doi.org/10.52447/map.v5i1.4182
Sukamto, E. T. (2023). Choosing an Audit or Submitting APA? Retrieved from https://pajak.go.id/id/artikel/memilih-pemeriksaan-atau-mengajukan-apa (March 20, 2024).
Syafrida, H. S. (2021). Research Methodology. Yogyakarta: KBM Indonesia Publisher.
Wardoyo, D. U., Ramadhanti, A. D., & Annisa, D. U. (2022). The Effect of Firm Size, Leverage, and Profitability on Tax Avoidance. Juremi: Jurnal Riset Ekonomi, 1(4), 388-396. https://doi.org/10.53625/juremi.v1i4.907
