The Effect of Capital Structure, Transfer Pricing and Fixed Asset Intensity on Tax Avoidance, With Company Size as A Moderating Variable

Abstract

Tax avoidance refers to a company’s efforts to reduce its tax burden by exploiting loopholes in tax regulations whilst remaining within the bounds of the law. These practices are a cause for concern as they affect government revenue, particularly in infrastructure sector companies, which have substantial funding requirements and hold significant assets. This study aims to analyse the influence of capital structure, transfer pricing, and fixed asset intensity on tax avoidance, and to examine the ability of firm size to moderate these relationships. A quantitative approach was employed using secondary data from financial statements of infrastructure companies listed on the Indonesia Stock Exchange for 2020–2024. The population consists of 68 companies. Using purposive sampling, 129 firm-year observations were initially obtained, and after handling outliers, 112 observations were used in the final analysis. Data were analysed via multiple linear regression and Moderated Regression Analysis (MRA) using SPSS. Tax avoidance was measured using the Effective Tax Rate (ETR), where a lower ETR indicates higher tax avoidance. The results show that capital structure and transfer pricing have no effect on tax avoidance. Conversely, fixed asset intensity has a positive effect on ETR, which significantly reduces corporate tax avoidance. Furthermore, firm size does not moderate any of these relationships. Thus, capital structure and transfer pricing are not determining factors of tax avoidance in the infrastructure sector, whereas fixed asset intensity plays a role in lowering it.