The Effect of Transfer Pricing, Thin Capitalization, and Capital Intensity on Tax Aggressiveness in Indonesian Industrial Companies

Abstrak

Tax aggressiveness is one strategy companies use to minimize their tax burden. This practice can lead to tax compliance issues and impact state revenue. This study examines the effects of transfer pricing, thin capitalization, and capital intensity on tax aggressiveness among Indonesian industrial companies from 2020 to 2024.  Transfer pricing is measured using the RPT (related party transactions) indicator; thin capitalization is measured using the DER (debt-to-equity ratio) indicator, capital intensity is measured using the CAP (capital intensity) indicator; and tax aggressiveness is measured using the ETR (effective tax rate) indicator. This study employs a quantitative approach using secondary data sources. The research population consisted of industrial companies listed on the IDX during 2020-2024, totaling 65 companies. The sampling technique employed was purposive sampling, with a sample of 12 companies and 60 observations. Data analysis was performed using the PLS-SEM (Partial Least Squares) approach in WarpPLS 8.0. The results showed that Transfer Pricing and Thin Capitalization had significant adverse effects on tax aggressiveness, whereas capital intensity had a significant positive impact.