Tunneling Incentive, Tax Rate, Leverage, and Profitability Effects on Transfer Pricing in Pharmaceutical Companies

Abstract

This research examines how tunneling incentives, effective tax rates, leverage, and profitability influence transfer pricing decisions among pharmaceutical companies listed on the Indonesia Stock Exchange between 2019 and 2023. Employing purposive sampling methodology, three pharmaceutical companies were analyzed using multiple linear regression analysis. Findings reveal that tunneling incentives and leverage significantly affect transfer pricing practices, whereas effective tax rates and profitability demonstrate no significant impact. Collectively, all four variables exhibit significant influence on transfer pricing decisions. These results contribute to understanding tax avoidance mechanisms in Indonesia's pharmaceutical sector and provide insights for regulatory policy development.