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Effects of Taxes, Tunneling Incentives and Bonus

MechanismsAgainst Transfer Pricing Decisions

MISPIYANTI*
Accounting Study Program, STIE Putra Bangsa, Jl. Ronggowarsito No. 18 Heroes of Kebumen Regency, Central Java Tel (0287)
384011Indonesia.
* Corresponding Author, E-mail address:mispi_71@yahoo.co.id

ABSTRACT
The aim of the research is to find empirical efficiency of tax, tunneling incentive and bonus mechanism toward transfer pricing decisions
taken by manufacturing companies listed in the Indonesia Stock Exchange. The research population are manufacturing companies listed in
Indonesia Stock Exchange around 2010 to 2013. The samples were taken using purposive sampling method. The research results show that
tax and bonus mechanisms do not have an effect toward companies' transfer pricing decisions. While, tunneling incentive has effect toward
companies' transfer pricing decisions.
Key Words: Transfer Pricing; Tax; Tunneling Incentive; Bonus Mechanisms.

ABSTRACT
The purpose of this study was to obtain empirical evidence of the effect of taxes, tunneling incentives and bonus mechanisms on the transfer pricing
decisions of manufacturing companies listed on the Indonesia Stock Exchange. The population used includes manufacturing companies listed on the
Indonesia Stock Exchange in 2010 - 2013, while the sampling method uses purposive sampling. The results of this study indicate that the tax
variables and the bonus mechanism have no significant effect on transfer pricing decisions. Meanwhile, tunnel- ing incentive has a significant effect
on transfer pricing decisions.
Keywords:Transfer Pricing;Tax; Tunneling Incentives; Bonus Mechanism.

PRELIMINARY
Transfer pricing practices from the perspective
ofgovernment regulation as stated in the
Regulation of the Director General of Taxes
Number 43 of 2010 which is amended by the
Regulation of the Director General of Taxes
Number 32 of 2011 concerning the Application of
the Principles of Fairness and Business Practice in
Transactions Between Taxpayers and Related
Parties is believed to result in reduced or lost
potential tax revenues of a country because
multinational companies tend to shift their tax
obligations from countries that have high tax rates
(high tax countries) to countries that apply low tax
rates (low tax countries).
On the other hand, from the business side,
companies tend to try to minimize costs (cost
efficiency) including minimizing corporate
income tax payments. For multinational
corporations, global-scale corporations
(multinational corporations), transfer pricing is
believed to be one of the effective strategies to
win the competition in the struggle for limited
resources.
As Jacob in Yuniasih et al. (2012)found that
transfers between large companies could result in
lower tax payments globally in general.
Multinational companies benefit because
VOL. 16 NO.1 JANUARY
2015
shift of income from countries with high tax rates
to countries thathave low tax rates.
Transfer pricingregulated in Article 18 of theLaw
Number 36 of 2008 concerning Income Tax. The
transfer pricing regulation covers several matters,
namely the definition of a special relationship, the
authority to determine the ratio of debt and equity,
and the authority to make corrections in the event
of transactions that are not arm's length. Based on
Law Number 36 Year 2008 Article 18 paragraph
(4), namely the special relationship between
corporate taxpayers can occur due to ownership or
control of the share capital of an entity by another
entity as much as 25% (twenty five percent) or
more, or between several entities. which 25%
(twenty five percent) or more of its shares are
owned by an entity. A special relationship may
result in unfairness in prices, fees, or other
rewards that are realized in a business transaction.
Several studies on tax motivation on transfer
pricing decisions have been carried out, including
by Bernard et al. (2006) who found the price of
related party transactions related to the tax rate
and tariff rate of the destination country. Then
Yuniasih et al. (2012) also found that taxes have
an effect on transfer pricing decisions. The
growing tax burden has triggered companies to
carry out transfer pricing in the hope of reducing
the burden. The magnitude of the decision to carry
out transfer pricing practices will result in lower
tax payments globally in general.
According to Hartati et al. (2015), tunneling
incentiveis the behavior of majority shareholders
who transfer the assets and profits of the
company for their own benefit,
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but minority shareholders share in their costs.
Research on tunneling incentives has been carried
out by Yuniasih et al. (2012) who found that
tunneling incentives have a positive effect on the
decision of manufacturing companies to transfer
pricing. In addition, Mutamimah (2009) found that
there was tunneling by majority shareholders
against minority shareholders through merger and
acquisition strategies in Indonesia.
According to Healey (1985), managers who
haveinformation on the company's net income
will act opportunistically to perform earnings
management by maximizing the current period's
profit. According to Hartati et al. (2015), when
the bonus is based on the amount of profit, it is
logical that the directors try to take action to
regulate and manipulate profits in order to
maximize the bonuses and remuneration they
receive. As Lo et al. (2010) found that there is a
tendency for management to use transfer pricing
transactions to maximize the bonuses they receive
if the bonus is based on profit. This is also
supported by Chan and Chow (1997) and Chan
and Lo (2005) which state that management can
take advantage of transfer pricing as a mechanism
for transferring profits between companies to
reduce taxes, increase management bonuses and
transfer resources from one company to another
with the same ownership. Based on the
background and explanation above, the
formulation of the problem in this study is "Do
taxes, tunneling incentives and bonus mechanisms
affect transfer pricing decisions in manufacturing
companies listed on the Indonesia Stock
Exchange in 2010-2013?".
The purpose of this research is to
test and prove empirically
 6
the effect of taxes, tunneling incentives and bonus
mechanisms on transfer pricing decisions
inmanufacturing companies listed on the Indonesia
Stock Exchange in 2010-2013. The results of this
study are theoretically expected to contribute ideas
in enriching insight into the transfer pricing
decisions of manufacturing companies listed on
the Indonesia Stock Exchange. Then practically,
the results of this study are expected to contribute
ideas to solving problems regarding the factors
that influence the transfer pricing decision making
of a company.
LITERATURE REVIEW AND
FORMULAHYPOTHESIS
AGENCY THEORY
Hartati (2015) explains that what is meant by
agency theory is a theory which states that there
are differences in interests between owners
(shareholders), directors (company professionals)
and company employees. Then there will be a
conflict between individual interests and the
interests of the company.
Agency theory can imply the existence
ofinformation asymmetry. Inter-group conflict or
agency conflict is a conflict that arises between
the owner and manager of the company where
there is a tendency for managers to prioritize
individual goals rather than company goals.
Furthermore, Colgan (2001) stated severalfactors
that can cause agency problems, namely moral
hazard, time horizon problems and managerial
risk avoidance
Moral hazardgenerally occurs in large companies
(high complexity), where a manager does not all
activitiesknown by shareholders and lenders.
Earnings Withholding (Earningsretention).This
problemrevolves around the tendency to make
excessive investment by the management (agent)
through improvement and growth with the aim of
increasing power, prestige, or appreciation for
himself, but can destroy the welfare of
shareholders.
Problems or time horizon conflicts arise as a
result of cash flow conditions where the principal
places more emphasis on cash flows for the future
whose conditions are uncertain, while
management tends to emphasize matters related to
their work. Meanwhile, managerial risk avoidance
problems arise when there is a limitation on
portfolio diversification related to managerial
income for the performance it achieves, so
managers will try to minimize the risk of company
shares from investment decisions that increase the
risk.
TRANSFER PRICING
According to Gunadi (1994) transfer pricing is
the total price for the delivery (transfer) of goods
or compensation for the delivery of services that
have been agreed upon by both parties in business
and financial transactions. In the context of tax
avoidance practices, the transfer pricing mode is
by engineering the imposition of transaction
prices between companies that have special
relationships in order to minimize the overall tax
burden owed on the group of companies (Rahayu,
2010). Transfer pricing can occur within a group
of companies and between companies that are
bound in a special relationship.
The definition of transfer pricing as a price
thatarising from the delivery of goods, services
and intangible assets, as already mentioned
VOL. 16 NO.1 JANUARY
2015
above is a neutral understanding. However,
according to Hubert (2004), the term transfer
pricing is also often connoted as something
that is not good (abuse of transfer pricing),
namely the transfer of taxable income (taxation
income) from a multinational company to
countries with low tax rates in Indonesia. order
to reduce the total tax burden of the national
group of companies.
The tax expense is discussed in more detail in
the Statement of Financial Accounting Standards
(PSAK) 46 of 2012 concerning income tax, it is
stated that income tax is a tax calculated based on
tax regulations and this tax is imposed on the
entity's taxable profit. Meanwhile, taxable profit
or taxable profit (tax loss or fiscal loss) is profit
(loss) for a period which is calculated based on
the regulations stipulated by the taxation
authority on the income tax payable (recovered).
To determine profit or loss for a period, it can be
obtained from the calculation of the aggregate
amount of current tax and deferred tax or is called
tax expense (tax income).
TRANSFER PRICINGIN
RULESINDONESIAN TAXATION
Regulations on transfer pricing in
generalregulated in Article 18 of Law Number 36
of 2008 concerning Income Tax. Further and
detailed rules regarding transfer pricing are
contained in the Regulation of the Director
General of Taxes Number 43 of 2010 which was
amended by the Regulation of the Director
General of Taxes Number 32 of 2011 concerning
the Application of the Principles of Fairness and
Business Ordinance in Transactions Between
Taxpayers and Related Parties.
TAX ANDTRANSFER PRICING
Even though from the sidemultinational
corporation,
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transfer pricingis a tool to mobilizeoperating profit
for its business purposes, the fiscal authority (tax
apparatus) always wants transactions that occur
between divisions or between companies in one
group to still refer to fair market prices and are
arm's length in nature. Developing countries,
including Indonesia, realize that multinational
corporations with various advantages use transfer
pricing techniques to divert Indonesia's tax
potential to other countries with various pretexts,
reasons and justifications for the engineering.
Therefore, the fiscal authority subjectively views
the purpose of transfer pricing as avoiding taxes,
the fiscal authority pays attention to two principal
things, namely affiliation (associated enterprises)
or special relationship and fairness or arm's length
principle.
Rahayu (2010) stated that the characteristics ofthe
relationship between a subsidiary company
(subsidiary company) in Indonesia and the parent
company (parent company) abroad which
according to the tax perspective is considered a
separate entity (separate entity). Thus, between the
subsidiary and the parent company, transactions
(inter-company transactions) are arranged in such
a way that the subsidiaries (subsidiary companies)
in Indonesia suffer losses, while the overall
business other than in Indonesia is still
experiencing profits so as to reduce losses. tax
burden in Indonesia. This is supported by the
opinion of Gusnardi (2009) which states that
multinational companies carry out transfer pricing
to minimize their companies' global tax
obligations. Then according to Yani (2001),
 6
the lowest or minimum tax burden in which the
country has a group of companies or divisions of
companies operating.
Jacob (1996) found that transfers between
large companies can result in lower tax payments
globally in general. Thus, multinational
corporations benefit from shifting revenues from
high-tax countries to low-tax countries. As stated
by Bernard et al. (2006) that related party
transaction prices and arm's-length are related to
the tax rate and import tariffs of the destination
country. In addition, Swenson (2001) found that
import tariffs and taxes have an effect on
incentives to conduct transfer pricing transactions.
Yuniasih et al. (2012) which states thatTaxes
have a positive effect on the company's
decision to transfer pricing.
The reason for the company to carry out transfer
pricing isone of them is to reduce the tax burden
which is getting bigger. Because in business
practice, entrepreneurs generally identify tax
payments as a burden so they will always try to
minimize the tax burden. Based on the above
formulation, the hypothesis in this study is as
follows:
H1: Taxes have an effect on transfer pricing decisions.
TUNNELING INCENTIVEANDTRANSFER PRICING
In a concentrated ownership structure,
ownership is concentrated in control rights and
cash flow rights by certain parties (family,
government or others) as controlling
shareholders. So that the increase in cash flow
rights in the hands of a controlling shareholder
can cause financial incentives to increase.
Ascension
This cash flow right will motivate controlling
shareholders to align their interests (alignment
effect) with the company or non-controlling
shareholders. However, when the controlling
shareholder increases its control through a
pyramid structure or cross-shareholding while
maintaining a low number of ownership, the
controlling shareholder will be motivated to
expropriate the company (entrenchment effect).
This is supported by Jian and Wong (2003) which
states that when a company has excess financial
resources, controlling shareholders will transfer
resources to their interests rather than distributing
them as dividends.
One of the ways commonly used by controlling
shareholders to expropriate is through related
party transactions. Expropriation is the process of
using control to maximize one's own welfare by
distributing wealth from other parties (Claessens
et al., 1999 in Sanjaya, 2010). The way that can be
done in the practice of expropriation is for
example the controlling shareholder seeks to
enrich himself by not paying dividends to
minority shareholders, transferring profits to other
companies that are also under his control
(Claessens, Djankov, Fan, & Lang, 1999) and also
doing sales and purchase transactions with related
parties.
Related party transactions are most likely used
as tunneling, because the price of transactions
with these related parties can be different from
those of independent parties. These related party
transactions can be in the form of sales or
purchases used to transfer cash or other current
assets out of the company through price
determination. unreasonable for
VOL. 16 NO.1 JANUARY
2015
holder's interestcontrolling share. This is
supported by Claessens et al. (2002) who found
that the weak protection of the rights of minority
shareholders, encourages majority shareholders
to conduct tunneling which is detrimental to
minority shareholders.
Ownership structure reflects the type of agency
conflict that occurs. For companies in Asia, most
have a concentrated ownership structure, including
in Indonesia.
This concentrated ownership structure creates the
potential for controlling shareholders to be further
involved in the management of the company. As
stated by Shieifer and Vishny (1997), Zhuang et
al. (2000), and Wiwattanakantang (2001), the
majority shareholder can monitor and control the
company's management, so that it has a positive
effect on company performance.
Gilson and Gordon (2003) identify two
possible ways that controlling shareholders can
gain private benefits over control of company
policies, namely through contractual policies with
other parties and company operating policies such
as large salaries and compensation. Thus, the
higher the expropriation incentive of the
controlling shareholder, the higher it will be to
carry out related party transactions.
Related party transactions can be utilizedas an
opportunistic goal by the controlling shareholder
to conduct tunneling. The related party
transactions can be in the form of sales or
purchases which are used to transfer cash or
other current assets out of the company through
unfair pricing for the benefit of the controlling
shareholder. Then the controlling shareholder
will get the power and
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incentives in a company. So,Jian and Wong (2003)
state that when companies have excess financial
resources, controlling shareholders will transfer
resources to their interests or tunneling rather than
distributing them as dividends.
Yuniasih et al., (2012) stated that tunneling
incentives have a positive effect on the decision of
manufacturing companies to transfer pricing.
Therefore, the hypothesis in the researchthese are as
follows:
H2:Tunnelingincentives affect transfer
pricing decisions.
Bonus Mechanism and Transfer Pricing
Given that the bonus mechanism based on the
amount of profit is the most popular way of
rewarding directors or managers, it is logical that
directors whose remuneration is based on profit
levels will manipulate these profits to maximize
bonus receipts and remuneration. As Scott (2006)
argues, bonus motivation can encourage managers
to choose accounting procedures that can shift
earnings from future periods to current periods.
This is supported by Hartati et.al., (2015), the
bonus mechanism is one of the strategies or
calculation motives in accounting whose purpose
is to maximize the receipt of compensation by the
directors or management by increasing the
company's overall profit. However, as a result of
transfer pricing practices, then it is possible that
there will be a loss in one of the divisions or
subunits. Therefore, management can take
advantage of transfer pricing as a mechanism for
transferring profits between companies in order to
increase
 6
management bonuses (Chan and Lo, 2005). So, it
can be concluded that the bonus mechanism is one
of the strategies or calculation motives in
accounting whose purpose is to reward directors
or management by looking at the company's
overall profit.
In carrying out their duties, directors tend to
want to show good performance to company
owners in order to get awards. The award can be in
the form of bonuses given based on the
performance of the directors in managing the
company. So the owner not only gives bonuses to
directors who succeed in generating profits for
their divisions or subunits, but also to directors
who are willing to cooperate for the good and
benefit of the company as a whole. This is
supported by the opinion of Horngren (2008)
which states that the bonus of directors is seen
from the performance of various divisions or teams
in one organization. The greater the overall
company profit generated, the better the image of
the directors in the eyes of the company owner.
Furthermore, the ongoing accounting practice
will focus on the accounting numbers that will be
created so that the performance is good, so thatIf the
accountability of the accounting numbers formed
is set aside, then the practice of illegal transfer
pricing in accounting becomes a natural thing.
The bonuses that exist in a company will create
incentives for management to increase the present
value of their bonus receipts (Watts and
Zimmerman, 1978) so that managers will prefer
accounting methods that increase current period
earnings. In line with that, Scott (2006) states that
bonus motivation can encourage managers to
choose accounting procedures that can shift
earnings from future periods to current periods.
this. It is also supported byHealy (1985) who
found that company managers with a net profit-
based bonus mechanism systematically adopted
accrual policies to maximize their expectations.
Lo et al. (2010), who found that there is a
tendency for management to use transfer pricing
transactions to maximize the bonuses they
receive if the bonus is based on profit. Chan and
Chow (1997) and Chan and Lo (2005) also state
that management can take advantage of transfer
pricing as a mechanism for transferring profits
between companies in order to increase
management bonuses from one company to
another with the same ownership.
In addition, Hartati et al. (2014) in his research
also states that company owners will see the
company's profits as a whole as an assessment of
the performance of their directors so that the
directors will try their best so that the company's
overall profit will increase, including by
implementing transfer pricing practices. Based on
the above formulation, the hypothesis in this study
is as follows:
H3: The bonus mechanism has an effect on transfer
pricing decisions.
FIGURE 1. RESEARCH MODEL
VOL. 16 NO.1 JANUARY
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RESEARCH METHODS
RESEARCH MODEL
Based on the formulated hypothesis
design, a research model is made as
presented in Figure 1.
TABLE 1. DETAILS OF SAMPLE CALCULATIONS FOR 2010-2013
RESEARCH POPULATION AND SAMPLE
The population in this study are manufacturing
companies listed on the Indonesia Stock Exchange
in 2010-2013. The reason for selecting the
population in this study is that most of the foreign
investment is made in companies engaged in
manufacturing and having substantial internal
company links with overseas parent companies.
The sample in this study used purposive sampling
method. This sampling technique is a sampling
method that is adjusted to certain criteria. The
details of the sample in the study can be seen in
Table 1.
TYPES AND METHODS OF DATA COLLECTION
The data used in this study is quantitative data
in the form of secondary data in the form of
reports of manufacturing companies listed on the
Indonesia Stock Exchange for the period 2010 -
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2013. The data used in research on taxes, tunneling
incentives and bonus mechanisms affect transfer
pricing decisions in manufacturing companies using
secondary data, namely the financial statements of
manufacturing companies in Indonesia published
on the website.www.idx.co.id.
OPERATIONAL DEFINITION OF RESEARCH
VARIABLES
Independent Variable
The independent variables in this study are taxes,
tunneling incentives and bonus mechanisms.
Tax
The tax in this study is a mandatory
contribution to the state owed by a coercive
agency based on the law, with no direct
compensation and is used for the needs of the state
for the greatest prosperity of the people. Taxes in
this study are proxied by the effective tax rate
which is a comparison of tax expense minus
deferred tax expense divided by taxable profit
(Yuniasih et al., 2012).
Tunneling incentive
Tunneling incentiveproxied by the percentage of
share ownership of 20% or more owned by
shareholders residing in other countries whose tax
rates are lower than Indonesia. This is in
accordance with PSAK No. 15 which states about
the significant influence held by shareholders with
a percentage of 20% or more.
Bonus Mechanism
Bonus is a lump sum paymentawarded for
meeting performance goals
 7

company. The bonuses provided by the company
can be in the form of benefits, commissions, sales
incentives, or employee benefits. The award of
bonus compensation is measured by a dummy,
where a value of 1 is given to companies with
foreign ownership that provide bonuses, bonuses,
commissions, or sales incentives to management,
while the other values are 0.
Analysis using logistic regression does
notneed to use the assumption of normality of
the independent variable data (Ghozali, 2013).
The logistic regression model is shown in the
following equation:
Information:

Dependent Variable
Transfer Pricingin this study is the sale of
products from one division to anotherthat
havespecial relationship and residing in another
country that has a lower tax rate than Indonesia.
Transfer pricing is calculated using a dichotomy
approach, namely by looking at the existence of RESULTS AND DISCUSSION
RESEARCH SAMPLE CHARACTERISTICS
sales to related parties.
Based on the sampling technique using purposive
Companies with foreign ownership that sell to
sampling, it can be seen thatof all manufacturing
related parties located in other countries with a
companies listed on the Indonesia Stock
lower tax rate than Indonesia are assigned a value
Exchange, there are 22 manufacturing companies
of 1, while others are assigned a value of 0.
from 2010 to 2013 that meet the research sample
criteria, so that the number of observations is 88.
METHODDATA ANALYSIS
DESCRIPTIVE STATISTICS Most of the companies controlled by foreign
Descriptive analysis is the most basic analysis parties carry out related sales to other countries
to describe the general state of the data. This with high tariffs. the tax is less than 25% where
descriptive analysis informs descriptive statistical the company is always trying to save on tax
data, including the minimum value, maximum expenses. Furthermore, most of the listed
value, average, and standard deviation. companies are controlled by foreign companies
which show a significant influence on share
LOGISTIC REGRESSION MODEL ownership and have a bonus mechanism awarded
Which methodused in this study is logistic to company management.
regression with the Stepwise method. The
TABLE 2. DESCRIPTION STATISTICS
feasibility of the regression model was assessed
using Hosmer and Lemeshow's Goodness of Fit
Test. The magnitude of the coefficient of
determination in logistic regression

indicated by the value of Nagelkerke R Square (Ghozali,

2013).
VOL. 16 NO.1 JANUARY
2015
DATA ANALYSIS RESULTS
Hypothesis testing is done by using logistic
regression. The difference between the initial -
2LL results and the final -2LL value is 10.554,
this indicates a decrease in the likelihood value,
where this can be shown by a better regression
model or in other words the hypothesized model
fits the data.
A good regression model is a regression withthe
absence of a strong correlation between the
independent variables. There is no symptom of
multicollinearity between tax variables, tunneling
incentive, and bonus mechanism in the regression
model because the correlation value between
independent variables is -0.951; -0.343; -0.000
which is far below the specified correlation limit
of 0.8.
The magnitude of the influence of the three variables
consisting of taxes, tunneling incentives and bonus
mechanisms on transfer pricing decisions
inmanufacturing companies listed on the
Indonesia Stock Exchange in 2010-2013
amounted to 16.9%. While the remaining 83.1%
is explained by other variables outside the
research model.
The regression model is feasible to be used in
subsequent analysis, because there is no
significant difference between the predicted
classification and the observed classification
because the statistical value of Hosmer
Lemeshow's Goodness of Fit Test is 8.086 with a
significance probability of 0.425 which is above
0.05. Thus, it can be concluded that the model is
acceptable.
HYPOTHESIS TEST
The results of hypothesis testing indicate that
the tax variable does not have a significant effect
on transfer pricing decisions in manufacturing
companies listed on the Indonesia Stock Exchange
in the period 2010 - 2013. This can be seen from
the significance level of each of 0.093 which is
greater than 0.05. Results
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This study is not in line with the research of
Yuniasih et al., (2012) which states that taxes
have a positive effect on the company's
decision to transfer pricing.
In its development, the company's effortsin
minimizing the tax burden that must be paid can
be done through tax management (Suandy, 2011).
Then according to Suandy (2011), the purpose of
tax management can be divided into two, namely
applying tax regulations correctly and efficiency
efforts to achieve proper profit and liquidity.
Furthermore, this study shows that tunneling
incentives have a significant effect on transfer
pricing decisions in manufacturing companies
listed on the Indonesia Stock Exchange in 2010 –
2013. This can be seen from the significance level
of each of 0.027 which is smaller than 0.05. So the
hypothesis which states that tunneling incentives
have a significant effect on transfer pricing
decisions can be accepted or can be proven. This
explains that foreign-owned company shares will
sell to related parties at an unreasonable price
determination for the benefit of the controlling
shareholder residing in a country with a lower tax
rate than Indonesia. Dwinanto (2010) states that
tunneling can be done by selling products to
related companies at lower prices. Then the
controlling shareholder will gain power and
incentives in a company. Therefore, the results of
this study are in line with the research of Yuniasih
et al., (2012) which states that tunneling incentives
have a positive effect on the decision of
manufacturing companies to transfer pricing.
Furthermore, in this study, it shows
that the bonus mechanism has no effect
 7

significant effect on transfer pricing decisions The implication in research on transfer pricing
onmanufacturing companies listed on the practices in multinational companies with foreign
Indonesia Stock Exchange in 2010 – 2013. This ownership status is that transfer pricing is a special
can be seen from the significance level of each of selling price used in exchanges between divisions
0.999 which is greater than 0.05. So the or companies. However, in practice, transfer
hypothesis which states that the bonus pricing is widely used illegally in order to
mechanism affects the company's transfer pricing minimize the company's tax burden. However, in
decisions cannot be accepted or is not proven. this study it is not proven, the possibility of
Therefore, the results of this study are not in line companies reducing the company's tax burden by
with Lo et al. (2010) who found that there is a implementing tax management.
tendency for management to use transfer pricing MechanismBonus is one of the strategies or
transactions to maximize the bonuses they motives for calculating in accounting whose
receive if the bonus is based on profit. In purpose is to reward directors or management by
addition, this study is also not in line with Hartati looking at overall profits. With the right bonus
et al. policy, the owner hopes that management can
improve company performance through efficient
CONCLUSION tax payments.
Based on the results of the analysis of the effect of However, an effort to save on tax expensesThis is
tax variables, tunneling incentives and bonus not always done with the bonus mechanism factor,
mechanisms on transfer pricing decisions in but the company can carry out tax management
companiesmanufactures listed on the Indonesia which can affect the company's overall value.
Stock Exchange from 2010 to 2013 it can be The limitation in this study is the use of
concluded that the empirical test results show that research objects that only focus on manufacturing
the tax and bonus mechanism have no significant companies listed on the Indonesia Stock
effect on the transfer pricing decisions of Exchange, so that in this study there are two
manufacturing companies listed on the Indonesia unsupported hypotheses that may be caused by
Stock Exchange during 2010 to 2013. for the other factors that can influence the company's
tunneling incentive variable has a significant effect transfer pricing decisions. This is supported by the
on the transfer pricing decisions of manufacturing Nagel Kerke R2 value of 16.9%, which means the
companies listed on the Indonesia Stock Exchange remaining 83.1% is explained by other factors
during 2010 to 2013. outside of this study. In this study, the bonus
mechanism only uses a dummy proxy, namely 1 if
the company gives bonuses to management and 0
if the company does not give bonuses to
management. Therefore, the suggestions that can
be put forward in
VOL. 16 NO.1 JANUARY
2015
In relation to the results of this study, Gusnardi
(2009) states that multinational companies carry
out transfer pricing to minimize their companies'
global tax obligations. However, in this study, this
statement has not been proven. Possibly because
the sample companies in this study were only
companies in Indonesia. Therefore, further
research can be carried out on companies that
have the same ownership both in Indonesia and
abroad. Then further research can use other
factors such as tax management with a cash
effective tax rate that might influence the
company's transfer pricing decisions,
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WTO. Hong Kong, PRC: Sweet & Maxwell Asia.
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