Corporate Tax Avoidance in an Emerging Market: The Critical Roles of Transfer Pricing and Earnings Management

Manufacturing companies in Indonesia face pressure to increase profitability while meeting their tax obligations, which has led to the emergence of various strategies to minimize tax burdens within legal boundaries, such as transfer pricing and earnings management. This phenomenon is important to study because tax avoidance practices can impact government revenue. This study aims to analyze the influence of transfer pricing and earnings management on tax avoidance among manufacturing companies listed on the Indonesia Stock Exchange (IDX) during the 2020–2024 period. This study employs a quantitative approach using secondary data obtained from the companies’ annual financial reports. The research sample consists of 25 companies with a total of 115 observations after outlier testing. The analysis method used is multiple linear regression with the aid of SPSS, which includes classical assumption tests, partial tests (t-tests), simultaneous tests (F-tests), and the coefficient of determination (R²). The results indicate that transfer pricing does not have a significant partial effect on tax avoidance, whereas earnings management has a negative and significant effect on tax avoidance. Simultaneously, both independent variables were found to have a significant effect on tax avoidance.