THE EFFECT OF TAXES ON TRANSFER PRICING ON

TOURISM, RESTAURANT, AND HOTEL COMPANIES

LISTED ON THE INDONESIA STOCK EXCHANGE IN 2019-

(Kiswanto, 2014) explain that the rapid growth of international economic activity also

stimulates development of multinational companies. In multinational companies various

international transactions occur between members (divisions), one of which is sale of goods

or services. Most of these business transactions are usually occurs between related companies

or between companies that have special relationship. Pricing for various transactions between

members (divisions) This is known as transfer pricing/transfer price.

(Soebyakto & Agustina, 2014) states that transfer pricing is a company policy in

determining transfer prices a transaction, be it goods, services, intangible assets, or financial

transactions made by the company.There are two groups of transactions in the transfer

pricing, namely intra-company transfer pricing and inter-company transfer pricing. Intra-

Transfer pricing by multinational companies is driven by tax or non-tax reasons.

Along with the times, practice Transfer pricing is often done to minimize the amount of tax

that must be paid. The growing tax burden triggers companies to carry out transfer pricing in

the hope of suppressing the load. Transfer pricing in the sale of goods or services

transfer the profits earned to a company domiciled in countries with low tax rates. But

because it hasn't availability of tools, experts, and standard regulations, the transfer inspection

Pricing is often won by taxpayers in tax courts so that multinational companies are

increasingly motivated to make transfers.

According to (Soebyakto & Agustina, 2014), taxes have a role in which is very

important in the life of the state, especially in the implementation of development because

taxes are a source of income to finance all expenditure includes development expenditure.

Tax becomes significant contributor to the government, but for companies tax is a expenses

that can reduce company profits. Of course, a high tax burden can motivate companies to

practice transfer pricing.

still present within the same company is called intra-company transfer pricing. While the

method of determining the transfer price between companies that have special relationship is

called inter-company transfer pricing. Inter-company transfer pricing itself can be classified

as domestic transfer pricing and international transfer pricing. The difference between the

two is domestic Transfer pricing is carried out between companies located in the same

country while international transfer pricing is carried out between companies that domiciled

in a different country. In the environment multinational companies will arise special

relationship transactions where transactions between members of the company or within a

group (intra-group) transactions). This can give rise to indications of the practice of transfer

pricing for tax avoidance, because it is carried out with third parties special, the determination

(Rosa, Andini, & Raharjo, 2017) shows that taxes have a significant negative effect on

transfer pricing. Meanwhile, research conducted by (Pratiwi, 2018) shows that taxes have an

insignificant effect on transfer pricing.

State that the tax variable positive effect on the indication of transfer pricing, where

transactions This is done with related entities located in other countries for the purpose of to

reduce the amount of tax paid by an entity. Entity perform related transactions by transferring

wealth to the entity others who are abroad to reduce profits so that they can reduce corporate

group tax burden. This is in line with the results of research conducted by (Tiwa et al., 2017),

(Tiwa et al., 2017) which states that taxes have a significant positive effect on the

implementation of transfer pricing. This indicates that the amount of tax burden that must be

used to make conclusions (Chandrarin, 2017). This research uses a population of tourism,

restaurant, and hotel companies listed on the Indonesia Stock Exchange in 2019 - 2020. The

sample is a collection of subjects that represent the population. The sampling in this research

used purposive sampling, namely the sampling method based on certain criteria. The

sampling in this research used purposive sampling with certain criteria so that a sample of 60

tourism, restaurant, and hotel companies listed on the Indonesia Stock Exchange in 2019 -

2020. The type of data based on the data source used in this research is secondary data. states

that secondary data is data that comes from parties or institutions that have used or published

it so that testing the validity and reliability of secondary data is not necessary. This research

used secondary data in the form of 2019 - 2020 financial statements on the IDX. The data is

The independent variable is a variable that is thought to have an effect on the dependent

variable. The independent variable in this research is transfer pricing. Transfer pricing

variable is proxied by the presence or absence of sales to special parties. Sales to special

parties are indicated transfer pricing practices. The price set in the sale to the parties

relationship usually overrides the principle of reasonableness by increasing or lower prices

(Saraswati & Sujana, 2017). The dummy criteria used is a value of 1 if the company makes a

sale transaction to a third party special, while the value 0 for entities that are not make sales

to special parties.

The dependent variable is the main variable that becomes the attraction or focus of

research. The dependent variable in this research is taxes. The tax variable is measured by the

2017).

According to Prof. Dr. P.J. Adriani: “Taxes are community contributions to state

(which can be forced) without getting reciprocal services (contra-performance) that can

be directly demonstrated and which is used to pay general expenses” (Kiswanto, 2014). In

Article 1 of the Income Tax Law, Income Tax is a tax that imposed on the tax subject on

the income received or earned in the tax year. Corporate Income Tax (Corporate Income

Tax) is a tax that imposed on income received or earned by the Agency as referred to in

the KUP Law. The subjects of Corporate Income Tax are: domestic corporate taxpayers

and foreign corporate taxpayers. Which the object of corporate income tax is income. Due

to differences in the recognition of income and expenses in the determining Income Tax

between taxation and commercial, it is necessary fiscal adjustments or reconciliations are

decrease in fiscal loss and negative correction resulting in reduced taxable profit or tax

loss increases.

Income Tax calculated based on Taxable Income which is actually paid to the

government, is referred to as income tax payable while Income Tax is calculated based on

Income (Feldstein, 1999). Before Tax referred to as Income Tax Burden. Some of the

differences occurs as a result of the difference between Income Tax Payable and Tax

Expense, as long as concerning time differences, it should be recorded and reflected in the

commercial financial statements, both in the deferred tax asset account as well as deferred

tax liabilities. Deferred tax assets can be equated such as overpayment of taxes, which

will be replaced in the future when temporary difference recovery. Meanwhile, deferred

cash ETR (payment of taxes in real time) cash) as a proxy in this study. Cash ETR is a

payout ratio in cash (cash taxes paid) on company profits before income tax.

The Organization for Economic Co-operation and Development (OECD), in

(Tiwa et al., 2017), defines transfer pricing as the price determined in transactions

between group members in a multinational company where the price the specified transfer

may deviate from the fair market price as long as it is suitable for the group. They may

deviate from the fair market price because their position is in a state of being free to adopt

whatever principle remains for the corporation. Gundai in his book (Tiwa et al., 2017)

an engineering systematic price manipulation with the intention of reducing profits,

making as if the company is losing money, avoiding taxes or duties in a country. The

engineering can take advantage of the tax rate in a country by shift the profit to the lowest

tax rate. Transfer pricing is usually set for products intermediate products, which are

goods and services that are supplied by the selling division to the buying division.

Based on the background of the problem, the hypothesis in this research is:

H1+ : Taxes has a significant positive effect on the company's transfer pricing.

b. Is an order from the parent company

d. Securing a competitive position

g. And others

Based on the purpose of transfer pricing above, it can be seen that the company does

not merely carry out transfer pricing practices to reduce its tax burden. However, there are

various other reasons why companies practice transfer pricing apart from the tax saving

mechanism.

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