To read the full version of this content please select one of the options below:

Transfer pricing practices and specific anti-avoidance rules in Asian developing countries

Dahlia Sari (Department of Accounting, Universitas Indonesia, Depok, Indonesia)
Sidharta Utama (Department of Accounting, Universitas Indonesia, Depok, Indonesia)
Fitriany (Department of Accounting, Universitas Indonesia, Depok, Indonesia)
Ning Rahayu (Department of Administrative Science, Universitas Indonesia, Depok, Indonesia)

International Journal of Emerging Markets

ISSN: 1746-8809

Article publication date: 5 May 2020

Issue publication date: 1 June 2021

Abstract

Purpose

The purpose of this paper is to examine the existence of income shifting using the practice of transfer pricing (TP), not only in sales but also in purchase and management service transactions, in Asian developing countries. The paper also investigates the role of the specific anti-avoidance rules (SAAR) in preventing TP practices in various types of transaction.

Design/methodology/approach

The research employs panel data from a sample of 200 subsidiaries in ten countries over the period 2010–2014.

Findings

Different results were obtained from previous research on developed countries, which found that TP practice was proven in sales transactions. This study finds no evidence for TP practices in sales transactions, but that they do take place in purchase, management service fee and management services revenue transactions. The study also finds evidence that SAAR reduces the practice of TP in sales transactions.

Originality/value

The research investigates TP practices, not only those related to sales, but also to purchases, management service fees and management service revenue to related parties. The sample comprises multinational subsidiaries located in Asian developing countries that have rarely been investigated in previous studies. This research examines the effect of SAAR in preventing TP practices in various types of transaction and develops scoring based on an instrument that integrates each SAAR rule/requirement.

Keywords

Acknowledgements

This paper is funded by Grant of Universitas Indonesia (Hibah PITTA 2018). The authors are grateful to Dr. Dwi Martani, Dr. Sylvia Veronica, Dr. Djoni Hartono, Prof. Dr. John Hutagaol, Dr. Samingun, Muhammad Halley Yudhistira PhD, Yulianti PhD, and B. Bawono Kristiaji MSc for their insightful comments that greatly improved the manuscript.

Citation

Sari, D., Utama, S., Fitriany, and Rahayu, N. (2021), "Transfer pricing practices and specific anti-avoidance rules in Asian developing countries", International Journal of Emerging Markets, Vol. 16 No. 3, pp. 492-516. https://doi.org/10.1108/IJOEM-10-2018-0541

Publisher

:

Emerald Publishing Limited

Copyright © 2020, Emerald Publishing Limited