Does firm size moderate bonus plan, tunnelling incentive and tax avoidance on transfer pricing?

Abstract

The research objective is to examine the effect of bonus plan, tunneling incentive and tax avoidance on transfer pricing. In addition, this study also aims to examine the effect of firm size in moderating the relationship between bonus plan, tunneling incentive and tax avoidance on transfer pricing. The population used is manufacturing sector companies listed on the Indonesia Stock Exchange. The sampling technique used purposive sampling and obtained 88 companies with observations for three years, so that 264 samples were observed. This study uses data analysis techniques, namely logistic regression analysis and Moderated Regression Analysis. The analysis result shows that bonus plan has no effect on transfer pricing. Tunneling incentive has positive effect on transfer pricing and tax avoidance has positive effect on transfer pricing. Firm size does not moderate the effect of bonus plan on transfer pricing. Firm size strengthens the effect of tunneling incentive on transfer pricing and firm size strengthens the effect of tax avoidance on transfer pricing. The theoretical implication of the research is that the company management has certain interests that can be seen from how the company performs tunnelling and tax avoidance by applying transfer pricing policy. While the practical implication for companies can consider the impact of the application of transfer pricing to reduce the risks that can occur.