THE EFFECT OF TAX AVOIDANCE ON BANKRUPTCY RISK WITH TRANSFER PRICING AS A MODERATING VARIABLE IN MULTINATIONAL COMPANY IN INDONESIA

Abstract

The Ministry of Finance reported an 8.9% increase in Indonesia's tax revenues in 2023, signaling recovery from the Covid-19 downturn. However, the State of Tax Justice highlights ongoing global tax losses, with 57% linked to multinational corporations using transfer pricing for tax avoidance. While legal, wenk governance may turn such practices into financial risks, even leading to bankruptcy. This study examines the effect of tax avoidance on bankruptcy risk, with transfer pricing as a moderating variable, using financial data from 15 manational companies with special relationship listed on the Indonesia Stock Exchange (2021-2024) Tax avoidance is measured by the Effective Tax Rate (ETR), bankruptcy risk by the Altman Z-score, and transfer pricing by related-party receivables. Simple linear regression reveals that tax avoidance reduces backruptcy risk, while transfer pricing positively moderates the relationship. though only slighty. The findings suggest tax avoidance offers short-term efficiency, but transfer pricing provides limited reinforcement. The study recommends stronger govemance and expanded future research with control variables and lenger observation periods