Government revenue, corporate bonus mechanism, and transfer pricing decisions: The moderating role of tax minimization

Document Type : Original Article

Authors

1 Departmant of Auditing, Faculty of management, University of Tehran, Tehran, Iran.

2 Departmant of Accounting, Farvardin Qaemshahr Institute of Higher Education, Qaem Shahr, Iran.

Abstract
Purpose: This study aims to examine the effects of government revenue and corporate bonus mechanisms on transfer pricing decisions. Additionally, the moderating role of tax minimization in these relationships is assessed.
Methodology: The study population consists of 116 companies listed on the Tehran Stock Exchange during 2017–2022. Data were collected from financial statements and official reports, and hypotheses were tested using panel data analysis and multivariate regression models.
Findings: Government revenue and the corporate bonus mechanism have a significant impact on transfer pricing. Furthermore, tax minimization positively moderates the effect of government revenue on transfer pricing but does not moderate the relationship between the corporate bonus mechanism and transfer pricing.
Originality/Value: By integrating government revenue, corporate bonus mechanisms, and tax minimization, this study provides new insights into the factors influencing transfer pricing in Iranian companies. The use of more objective measures for related-party transactions enhances the accuracy of transfer pricing assessment compared to previous studies, offering practical implications for tax authorities and policymakers.

Keywords

Subjects


[1]      Suandy, E. (2016). Tax planning. South Jakarta: Salemba Empat Publisher.
[2]      Arabmazar, A., Bagheri, B., & Jafari Parvar, M. (2014). An investigation into transfer pricing (TP) in Iranian tax system. Journal of tax research, 22(21), 9–38. (In Persian). http://taxjournal.ir/article-1-253-fa.html
[3]      Hartati, W., Desmiyawati, D., & Azlina, N. (2014). Analysis of the effect of taxes and bonus mechanisms on transfer pricing decisions: an empirical study of all companies listed on the indonesian stock exchange. Journal of the national symposium on accounting, 17(18), 1–18. https://www.scribd.com/doc/264255784/Analisis-pengaruh-pajak-dan-mekanisme-bonus-terhadap-keputusan-transfer-pricing-3-files-merged-docx?utm_source=chatgpt.com
[4]      Hasani A, M., & Sheri, A, S. (2017). Examination of the effects of the managerial ability on tax avoidance. Journal of accounting knowledge, 8(1), 107-134. (In Persian). https://doi.org/10.22103/jak.2017.1649
[5]      Jensen, M. C., & Meckling, W. H. (1976). Theory of the firm: managerial behavior, agency costs and ownership structure. Journal of financial economics, 3(4), 305–360. https://doi.org/10.1016/0304-405X(76)90026-X
[6]      Williamson, O. E. (2007). The economic institutions of capitalism. firms, markets, relational contracting. In Das summa summarum des management: die 25 wichtigsten werke für strategie, führung und veränderung (pp. 61–75). Wiesbaden: Gabler.  https://doi.org/10.1007/978-3-8349-9320-5_6
[7]      Casey, R., & Beck, K. (2018). Tax minimization and corporate behavior. Journal of economic behavior & organization, 150, 215–232.
[8]      Ernst & Young. (2010). 2010 global transfer pricing survey. https://www.slideshare.net/slideshow/2010-global-transfer-pricing-survey/6776501?utm_source=chatgpt.com
[9]      Mispiyanti, M. (2015). Effect of taxes, tunneling incentives and bonus mechanisms on transfer pricing decisions. Journal of accounting and investment, 16(1), 62–73. https://journal.umy.ac.id/index.php/ai/article/download/1348/1392/0?utm_source=chatgpt.com&__cf_chl_tk=Z4bPjA.VEl5x9KV2n9Z2BmCpisW22IB5u_f96iAYOTg-1761627732-1.0.1.1-5FoVXb8Wu22GbPizQErPEgaito25BbA9FSf5REAE95g
[10]    Susanti, A., & Firmansyah, A. (2018). Determinants of transfer pricing decisions in Indonesia manufacturing companies. Jurnal akuntansi dan auditing indonesia, 22(2), 81–93. https://doi.org/10.20885/jaai.vol22.iss2.art1
[11]    Belori, A., Moradi, M., & Hamidreza, Y. (2021). Designing a structural interpretation analysis model of factors affecting tax evasion on legal entities’ income. Tax research journal, 29(49), 83–108. http://dx.doi.org/10.52547/taxjournal.29.49.83
[12]    Karimi, S., Mohammadi, A., Mottaqi, A. A., & Arabsalehi, M. (2022). Presenting a model for determining the tax transparency score of companies using the AHP method. Journal of tax research, 30(55), 79–106. http://dx.doi.org/10.52547/taxjournal.30.55.3
[13]    Abdoli, G., Abrishami, H., & Hoseinifard, S. M. (2016). Favorable tax audit in order to reduce tax evasion in income tax:a theoretical and empirical analysis. Journal of tax research, 28(76), 41-67. http://taxjournal.ir/article-1-763-fa.html
[14]    Yuniasih, N. W., Rasmini, N. K., & Wirakusuma, M. G. (2012). The influence of taxes and tunneling incentives on transfer pricing decisions of manufacturing companies listed on the Indonesia Stock Exchange. National symposium on accounting 15 banjarmasin, 1–23.
[15]    Pourheidari, O., Fadavi, M. H., & Amininia, M. (2014). Investigating the effect of tax avoidance on the transparency of financial reporting of companies listed on the Tehran Stock Exchange. Economic research journal, 14(52), 69–85. https://joer.atu.ac.ir/
[16]    Lo, A. W. Y., Wong, R. M. K., & Firth, M. (2010). Tax, financial reporting, and tunneling incentives for income shifting: an empirical analysis of the transfer pricing behavior of Chinese-listed companies. Journal of the american taxation association, 32(2), 1–26. https://doi.org/10.2308/jata.2010.32.2.1
[17]    Indriaswari, Y. N., Nita, R. A. (2017). The influence of tax, tunneling incentive, and bonus mechanisms on transfer pricing decision in manufacturing companies. The indonesian accounting review, 7(1), 69–78. https://doi.org/10.14414/tiar.v7i1.957
[18]    Rosa, R., Andini, R., & Raharjo, K. (2017). Effects of taxes, tunneling incentives, bonus mechanisms, debt covenant and good corporate governance (Gcg) on transfer pricing transactions (study of manufacturing companies listed on the Indonesia Stock Exchange 2013 – 2015) Ria. Journal of accounting, 3(3), 24–35.
[19]    Sujana, I. K., Suardikha, I. M. S., & Saraswati, G. (2022). Tax, bonus mechanism, tunneling incentive, debt covenant and transfer pricing in multinational companies. Matrik: jurnal manajemen, strategi bisnis dan kewirausahaan, 16(1), 63–76. https://doi.org/10.24843/MATRIK:JMBK.2022.v16.i01.p05
[20]    Nuradila, R. F., & Wibowo, R. A. (2018). Tax minimization sebagai pemoderasi hubungan antara tunneling incentive, bonus mechanism dan debt convenant dengan keputusan transfer pricing. JIFA (journal of islamic finance and accounting), 1(1), 64–76. http://ejournal.iainsurakarta.ac.id/index.php/jifa
[21]    Masri, I., & Martani, D. (2012). The effect of tax avoidance on the cost of debt. Journal of the national symposium on accounting, 1(1), 1–27.
[22]    Noviastika, D., Mayowan, Y., & Karjo, S. (2016). The influence of taxes, tunneling incentive, and good corporate governance (GCG) on indications of transfer pricing to manufacturing companies listed on the Indonesia Stock Exchange. Journal of taxation, 8(1), 1–9.
[23]    Kiswanto, N., & Purwaningsih, A. (2014). The effect of tax, foreign ownership, and company size on transfer pricing in manufacturing companies in Bei in 2010-2013. Journal of accounting economics, 1–15.
[24]    Seyyedi, H. (2006). Theoretical foundations of transfer pricing. Chartered accountant, 3(8–9), 91–96. (In Persian). https://www.magiran.com/volume/33862
[25]    Suryarini, T., Hajawiyah, A., Hidayah, R., Gurendrawati, E., & Nany, M. (2021). The impact of state revenue and bonus mechanism on transfer pricing decisions with tax minimization as a moderating variable. Academy of accounting and financial studies journal, 25(5), 1–9. https://d1wqtxts1xzle7.cloudfront.net/105788650/The-impact-state-revenue-and-bonus-mechanism-transfer-pricing-decisions-with-tax-minimization-as-moderating-variable-1528-2635-25-5-780-libre.pdf?1695020781=&response-content-disposition=inline%253B+filename%253
[26]    Pakmaram, A., Madadizadeh, E., & Behnamoon, Y. (2015). The effect of tax planning on firms market performance. Journal of tax research, 22(24), 202–219.
[27]    Maatoufi, A., & Najari, M. (2019). The effect of CEO tenure and tax planning of listed companies in Tehran Stock Exchange. Journal of tax research, 40(88), 126–156. (In Persian). http://taxjournal.ir/article-1-1594-fa.html
[28]    Mohammadi, M. (2014). The moderating effect of board characteristics on the relationship between firm value and tax planning of companies listed on the Tehran Stock Exchange. Quarterly journal of capital market analysis, 2(1), 102–132. (In Persian). https://journals.iau.ir/article_692235.html?lang=en
[29]    Anissa, R. R., & Handayani, B. D. (2015). Analysis of factors that motivate company management to perform tax planning. Accounting analysis journal, 4(1), 1–11.
[30]    Firmansyah, A., & Febriyanto, A. S. (2018). The effects of tax avoidance, accrual earnings management, real earnings management, and capital intensity on the cost of equity. Jurnal dinamika akuntansi, 10(1), 40–50. http://dx.doi.org/10.15294/jda.v10i1.12976
[31]    Septiyani, R. P. P., Ramadhanti, W., & Sudibyo, Y. A. (2018). Some factors that affect transfer pricing decision. Soedirman accounting review, 3(1), 21–38. https://doi.org/10.20884/1.sar.2018.3.1.1158
[32]    Shafiee, S., & Kamali, S. (2012). Tax exceptions and its relationship with transfer pricing in the Iranian Taxation System. Journal of tax research, 20(14), 105–134. (In Persian). http://taxjournal.ir/article-1-58-fa.html
[33]    Watts, R. L., & Zimmerman, J. L. (1986). Positive accounting theory. Prentice-Hall Inc. https://ssrn.com/abstract=928677
[34]    Claessens, S., & Djankov, S. (1999). Ownership concentration and corporate performance in the Czech Republic. Journal of comparative economics, 27(3), 498–513. https://doi.org/10.1006/jcec.1999.1598
[35]    Heydari, D., Sohaili, K., & Fallahati, A. (2022). The impact of uncertainty on tax burden of companies listed in the Tehran Stock Exchange: the quantile regression approach. Journal of tax research, 30(54), 144–170. http://dx.doi.org/10.52547/taxjournal.30.54.144
[36]    Aharony, J., Wang, J., & Yuan, H. (2010). Tunneling as an incentive for earnings management during the IPO process in China. Journal of accounting and public policy, 29(1), 1–26. https://doi.org/10.1016/j.jaccpubpol.2009.10.003
[37]    Khani, A., Imani, K., & Yousefi, A. (2014). Tax avoidance, its measurement and factors affecting it. Accounting and social benefits, 4(4), 121–142. https://doi.org/10.22051/ijar.2015.2013
[38]    Pramana, A. H., & Laksito, H. (2014). The influence of taxes, bonus mechanisms, tunneling incentives and debt covnant on company decisions to perform transfer pricing [Thesis]. https://eprints.undip.ac.id/45246/
[39]    Hashemi, M., Etemadi, H., & Rezazadeh, J. (2022). Modeling Tax Evasion in Value Added Tax, A Game Theory Approach. Journal of tax research, 30(55), 7–51. (In Persian). http://dx.doi.org/10.52547/taxjournal.30.55.2
[40]    Mangoting, Y. (2000). Taxation aspects in transfer pricing practices. Journal of accounting & finance, 2(1), 69–82.
[41]    Tang, T. Y. H. (2016). Privatization, tunneling, and tax avoidance in Chinese SOEs. Asian review of accounting, 24(3), 274–294. https://doi.org/10.1108/ARA-08-2014-0091
[42]    Djumena, E. (2009). Suspected of embezzling taxes, PT Adaro is reported to the po-lice. https://nasional.kompas.com/read/2008/07/09/21333188/diduga.gelapkan.pajak.pt.adaro.dilaporkan.ke.polisi.
[43]    Cahyadi, A. S., & Noviari, N. (2018). The influence of tax, exchange rate, profitability, and leverage on transfer pricing decisions. E-journal of accounting, 24(2), 1441–1473.
[44]    Utama, C. A. (2015). Determinants of the amount of related party transactions: governance, level of disclosure, and ownership structure. Indonesian journal of accounting and finance, 12(1), 37–54.
[45]    Santosa, S. J. D., & Suzan, L. (2018). Effect of taxes, tunneling incentives, and bonus mechanisms on transfer pricing. Journal of accounting studies, 19(2), 76–83.
[46]    Petersen, M. A. (2008). Estimating standard errors in finance panel data sets: comparing approaches. The review of financial studies, 22(1), 435–480. https://doi.org/10.1093/rfs/hhn053
[47]    Marfuah, M., & Azizah, A. P. N. (2014). The Influence of Taxes, Tunneling Incentives and Exchange Rates on Company Transfer Pricing Decisions. Indonesian journal of accounting & auditing., 18(2), 156–165.
[48]    Lestari, T., & Jusman, J. (2025). Tax burden and bonus mechanisms on transfer pricing with tunneling incentive as a moderating variable. Journal of social science, 6(3), 378–393. https://jsss.co.id/index.php/jsss/article/download/1041/1254