Transfer Pricing As a Vehicle in Corporate Tax Avoidance: Insights from Systematic Literature Review

Transfer pricing is often employed as a strategic approach by multinational corporations to optimize tax liabilities and maximize profits. This study aims to assess the impact of variables such as transfer pricing, leverage, capital intensity, financial constraints, and other factors on tax avoidance across various industry sectors. Using a Systematic Literature Review (SLR) approach, this study analyzes 30 journal articles that investigate the role of these variables in tax avoidance, encompassing both quantitative and qualitative research methodologies. Findings indicate that transfer pricing, especially when influenced by high leverage and financial constraints, has a significant association with tax avoidance practices. Additionally, factors such as income smoothing and capital intensity also impact tax avoidance strategies, though the extent of their influence varies across different industry contexts. This review underscores the need for enhanced transfer pricing regulations, particularly in developing countries, to address limitations in monitoring and controlling tax avoidance. A more flexible regulatory framework tailored to industry characteristics, along with international cooperation, is recommended to achieve more uniform standards. Strengthened oversight and stricter regulations are expected to improve the management of transfer pricing practices, thereby fostering a fairer business environment and supporting national fiscal sustainability.