The Effect of Foreign Ownership, Capital Intensity and Transfer Prices on Tax Avoidance with Company’s Size as Moderator (Case Studies of Industrials Companies Listed on The Indonesian Stock Exchanges For the 2016-2021)
Authors: Astri Herlina  , Nera Marinda Machdar  , Cahyadi Husadha  
Published: January 2024

The research is about to test and analyze the impact of foreign ownership, capital intensity, and transfer prices on tax avoidance and to test and analyze the impact of companies' size in moderating foreign ownership, capital intensity, and transfer prices on the tax avoidance listed in the Indonesian stock exchange. Variables used in this study are foreign ownership, capital intensity, and transfer prices as independent variable, tax avoidance as a dependent variable, and company size as a moderate variable. Selection of samples in this study used a factoring method to the established criteria, allowing 27 companies to acquire six years, the total sample used is 162 data.  The type of data used is a secondary data obtained from the company's annual financial statements of 2016-2021. The method of data analysis used are panel data analysis, descriptive statistic analysis, classic assumptions test, multiple and moderate regression tests, and hypothetical testing with the help of Eviews 12.
Purpose – The objective to be achieved in this study are as follows (1) To test and analyze the effect of foreign ownership on tax avoidance. (2) To test and analyze the effect of capital intensity on tax avoidance. (3) To test and analyze the effect of transfer prices on tax avoidance. (4) To test and analyze whether company size moderates foreign ownership against tax avoidance. (5) To test and analyze whether the size of the company moderates the capital intensity against tax avoidance. (6) To test and analyze whether the size of the company moderates the transfer price against tax avoidance.
Design/methodology/approach – This research method used is a quantitative method.
Findings – The results of the research: (1) Foreign ownership has a positive effect on tax avoidance; (2) Capital intensity negatively affects tax avoidance; (3) Transfer prices negatively affect tax avoidance; (4) Company size weakens the influence of foreign ownership on tax avoidance; (5) Company size weakens the effect of capital intensity on tax avoidance; (6) Company size weakens the effect of transfer pricing on tax avoidance.
Research limitations/implications – (1) There are some companies that display the details of their company's share ownership, but for foreign shareholding, many companies do not have foreign shares and do not even display details. (2) Not many companies display related receivables on assets, making it difficult for researchers to calculate transfer prices. (3) The results of this study show that not all variables have a positive and significant effect, where there is a possibility of human error at the time of data tabulation.
Practical implications – Foreign ownership, capital intensity and transfer prices are among the factors influencing tax avoidance. Companies that have foreign ownership will influence the company's policy regarding tax avoidance, the greater the portion of foreign ownership in the company the more it will avoid taxes because foreign shareholders who dominate an issuer will influence management in determining policies that will benefit them such as the company's policy to pay taxes. The higher the intensity of fixed assets owned by the company, the higher the possibility of the company to avoid taxes by utilizing depreciation expenses that will affect tax payments and companies that transfer profits to affiliates located in other countries that have smaller rates or even do not charge tax rates by taking advantage of loopholes in tax regulations.