THE EFFECT OF TRANSFER PRICING, INVENTORY INTENSITY, SALES GROWTH, AND THIN CAPITALIZATION ON TAX AVOIDANCE

Abstract

This study aims to examine the effect of transfer pricing, inventory intensity, sales growth, and thin capitalization on tax avoidance. This study uses quantitative methods with secondary data in the form of annual reports of non-cyclical consumer sector companies listed on the Indonesia Stock Exchange (IDX) for the 2021-2023 period with a total of 25 company samples and 75 data observations. The analysis used includes descriptive statistical analysis, and panel data regression analysis with the help of Eviews 13 software. In determining the appropriate panel data regression model, this study conducted a series of model selection tests. The test results show that the Common Effect Model is the best model to use in regression analysis. The results of this study indicate that inventory intensity has a significant effect on tax avoidance, which proves that the greater the level of inventory invested by the company, the result is that the value of the cost of goods sold decreases, thereby causing high corporate profits and corporate tax burden of the company. Meanwhile, transfer pricing, sales growth, and thin capitalization have no effect on tax avoidance. The results of this study are expected to provide insight for company managers, investors and creditors, and the government in understanding the factors that influence the occurrence of tax avoidance practices in a company.