THE EFFECT OF TRANSFER PRICING, THIN CAPITALIZATION AND FOREIGN OWNERSHIP ON TAX AVOIDANCE

Abstract

This study aims to examine the effect of transfer pricing, thin capitalization and foreign ownership on tax avoidance. Scheme of tax avoidance in a form of transfer pricing is used through the transfer of profits from countries with higher corporate income tax rate to countries with lower corporate income tax rate. Another scheme is company’s financing policy with a larger portion of debt than equity (Thin Capitalization). The last scheme in this study is foreign ownership with a relatively large portion. The objects of study are multinational manufacturing companies listed on the Indonesia Stock Exchange in 2017-2020. The procedure of sampling used is purposive sampling. The method of analysis applied is multiple regression analysis. The results of analysis prove that thin capitalization has an effect on tax avoidance.