Arms Length Gap Transfer Pricing Indo PDF

Brawijaya International Conference on Accounting and Business (BICAB) 2013
Department of Accounting FEB Universitas Brawijaya

Indonesia, 29-30 August 2013
7+(*$32)$506-LENGTH PRINCIPLE ON TRANSFER PRICING

PRACTICE IN INDONESIA
Dewi Utari
Doctoral student of Accounting Program in Brawijaya University
riuta311@gmail.com
Unti Ludigdo
M. Achsin
Imam Subekti
University of Brawijaya, Indonesia
Abstract
Transfer pricing (TP) is the price charged by one segment of an organization for
a product or service that is supplies to another segment of the same organization; or
related party transactions within group of multinational enterprises (MNEs). Some TP
cases used incorrect transfer price scheme in order to reduce the overall tax burden of
groups. The question to be resolved is: how should a cross-border transfer price be set
among related parties, be it for goods, services, capital, or intangibles? The answer is
most of developed world is the arm's-length price (ALP) principle. The ALP requires
that intercompany prices be set as if the related parties were independent unrelated
parties. For many decades, governments and tax payers have struggled to define the
ALP in actual operations.
That is in common, tax rules governing TP around the world generally anticipate
that an entity that does business with related parties will, over the long term, earn profit
from its intra-group transactions; and ascertain that the transactions are imposed on
DUPV OHQJWK SULQFLSOH 2YHU WKH \HDUV WKH 2(&' 73 *XLGHOLQHV DV WKH
latest revision) has quietly taken centre stage in international tax policy development.
The influence of the OECD TP Guidelines is evident in the shape of Indonesian
international income tax policies. Despite the acceptance of OECD TP Guidelines as the
best practice guidance in minimizing the risk of unrelieved double taxation and TP
problems among member and non-PHPEHU2(&'VFRXQWULHVVRPHLVVXHVDOVRDULVHRQ
practical manner in Indonesia, especially interpretation diversity of application ALP
principle in transfer pricing practice among academic, tax practitioners, and tax
authorities. Thus diversiW\ FUHDWHV D JDS RI LQWHUSUHWDWLRQ WKDW FDQ EH VWXG\ WKURXJK
hermeneutics.
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Keywords: AUPV-length Price, Transfer Pricing, Taxation, Gap of Interpretation,

Hermeneutic.
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BACKGROUND
Transfer Pricing (TP) is a business practice to determine the setting-price used in
a related-party transaction. In taxation, TP reflect the activitiy to verifying the settingprice is an arm's-length price, as if price used among independent-party transaction.
Lowell and Martin (2010) stated that TP refers to the methodologies used to price
transactions in goods, intangibles, services, or capital between related parties. These
PHWKRGRORJLHVPXVWHVWDEOLVKDSULFHWKDWLVDUPVOHQJWKLHDVLIWKHSULFHZDVDJUHHG
XSRQE\XQUHODWHGSDUWLHV7KLVDUPV-length standard is used globally.
Hamaekers' research (2001) shows that TP generally occurs within the context
of transaction (1) between two different units, or (2) between a Head Office and its
Branch Office (in the form of a Permanent Establishment/PE), or (3) between two
branch offices of the same group company. For economic purposes, TP is defined as a
stipulation of price of goods, services and intangible assets of a unit to another unit
within the same company (intra-firm transactions) or between related party within a
same group of company (inter-firm transactions) (Darussalam and Septriadi, 2008).
Transfer pricing issues are international taxation problems which have been
emerging for the last three decades, especially TP practices in transactions between
controlled companies in same group company as in Multinational Enterprises (MNEs).
TP issues have put together tax practitioners (taxpayers and tax consultants) and tax
authorities in the debate at tax audit and/or court in some countries (Halperin, 1991;
Anctil and Dutta, 1999; Eden, 2003; Eden, Valdez and Li, 2005; Cools, Emmanuel and
Jorissen, 2008; Durst, 2010; Ernst & Young, 2012). MNEs are companies operating in
more than one country under the control of a certain party (Darussalam and Septriadi,
2008), having its management centre in a single home country, where its operational
activities differ from those in other host countries. MNEs are found to be the powerful
players to influence the local economy of host countries, and even world economy.
Moreover, MNEs actively emphasize the significance of global governance in the host
country's company, as well as having a significant role in the globalization and
international affairs between countries around the world (Chevalier, Prasetyantoko and
Rokhim, 2006).
MNEs are currently the giants of economy in almost all countries around the
world, including Indonesia. The existence of MNE is to produce and market goods and
services from which it can earn profit. A multinational enterprisev is established to
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generate profit for the group as a whole, and then profit will be accumulated in the form
of capital, which is entirely unGHU WKH FRQWURO RI 01(V JURXS Capital accumulation
used by MNE to control and take over world economy. Nowdays, MNEs appeared in
various host countries due to the rapid development of globalization. Globalization era
is marked with the general characteristic of a global information and communication
network based on new revolutionary technology (Capra, 2009). The globalization
process in the field of economy is marked with fast, real-time capital movement through
global financial networks. The global financial network makes use of the existing
information and telecommunication technological progress. The globalization also
occurs in developing countries, especially ASEAN countries. In Indonesia, where the
economy revolves around production and distribution networks, the globalization
process has a significant influence on the public and private policies and practices
(Asher and Rajan, 2001).
The ASEAN countries have attract the MNE to invest their capital resources,
such as obvious in mid-1960s when third world countries started making Foreign Direct
Investments (FDI). The rapid movement of MNEs by its FDI in host countries posed a
question on the ontology of MNEs amidst the current economic globalization
development. The ontology of establishment a unit of business or affiliate companies by
MNE is to minimize the transactions cost by making internal market and its final goal to
earn profit for the entire MNE group. Therefore, Bruno (1997); Allmond, Edwards and
Clark (2003); and Collingsworth (2006) stated that MNEs are found to have performed
FDI in host countries with low costs of manpower, easy access to obtain natural
resources, conducive and potential market to distribute their products, and relatively
minor hindrance from the government. Host countries government's limitation of power
RYHU WKH 01(V decision is a "joyous" factor, since they would be invited by host
countries governments to invest their capital, and expected to create "locomotive
effect"1 for the growth and welfare of those countries.
The Locomotive Effect is the effect which an economic expansion in one large country can have on
other parts of the world economy, causing them to expand as well, as the large country demands more
of their exports".
(http://www.encyclo.co.uk)
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TRANSFER PRICING ISSUES IN INDONESIAN TAXATION

A. FDI and MNEs in Indonesia
FDI is an international capital flow where a company from a certain country
establishes or extends itself in other countries. The capital flow movement mechanism
prompts the relocation of resources and the execution of control over foreign companies
operating in investment host countries. FDI progress by MNEs to the emerging
countries in Asia has been rapid since early 1990s. Indonesia started opening its policy
to foreign investment since the third quarter of 2000. Data by the Indonesia Investment
Coordinating Body (BKPM) mentions that there has been a significant foreign
investment since 2011 due to XSJUDGHG WKH FRXQWU\V VRYHUHLJQ FUHGLW UDWLQJ WR
investmenr grade by the Fitch Ratings and Moody's Investors Service ranking
institution. This upgraded rating increase the FDI realization in fourth quarter of 2012 to
22.4% compared to the previous year, with full-year FDI increasing by 26% (Anonym,
2013).
The result of survey by UNCTAD shows that Asian countries have changed
their policy to make investors more interested in making investments in Indonesia.
Policy changes are performed in China by removing the limitations on foreign bank and
travel agency operations, as well as allowing 100% foreign ownership in the hospitality
industry. Malaysia also allowed foreign companies to make 100% investments in
brokerage and venture capital companies. Indonesia introduced 15-year income taxbreaks for foreign companies which have invested in certain regions. Korea approved
faster FDI processing from 30 to 20 days. Thailand introduced new incentives in
pharmaceutical projects. Furthermore, FDI investment by MNEs in four ASEAN
countries (Thailand, Malaysia, Philippines and Indonesia) is mostly performed for the
purpose of production. Meanwhile, in other Asian countries (Korea, Taiwan, Singapore
and Hongkong), FDI has the purpose of making sales (Kurniati, Prasmuko and Yanfitri,
2007).
United Nations Conference on Trade and Development (UNCTAD) reported
that the number of MNEs continues WR LQFUHDVH HDFK \HDU 7KH 81&7$'V World
Investment Report (WIR, 2009) stated that there are at least 889,416 multinational
enterprises around the world, which consist of 82,053 mother companies and 807,363
affiliates. The 2012 WIR UNCTAD reported 65,000 mother companies around the
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world with 850,000 branches/affiliates with a total asset of USD 25 trillion. They are
responsible for 54 million direct jobs and generate a total of USD 19 trillion of revenue
and constitute 66% of the world export (UNCTAD, 2012a).
Developing countries which received investment from multinational companies
are among those with the highest perceived growth potentials. The 81&7$'V:RUld
Investment Prospect Survey (WIPS) 2010-2012 shows that Indonesia is in the ninth
place out of 15 most profitable host countries for FDI. The 15 countries are (1) China,
(2) India, (3) Brazil, (4) United States of America, (5) Russian Federation, (6) Mexico,
(7) United Kingdom, (8) Vietnam, (9) Indonesia, (10) Germany, (11) Thailand, (12)
Poland, (13) Australia, (14) Franc, and (15) Malaysia. Furthermore, UNCTAD
presented data of the world's largest investor countries which are also the home
countries of MNEs, namely (1) United States of America, (2) China, (3) Germany, (4)
United Kingdom, (5) France, (6) India, (7) Canada, (8) Spain, (9) Russia and (1) Italy
(UNCTAD, 2012b).
B. How MNEs' Works? An Indication of Transfer Pricing Practice

The role of multinational enterprises in world trade has increased dramatically
over the last 30 years. The rationale for the MNE is that it reduces transaction costs by
buying up complementary assets located in different nations and so it creates an
LQWHUQDO PDUNHW2 for the intermediate products (Rugman, 2006). In many MNEs,
pricing is a sensitive and complex business matter and is often not within the purview of
the tax department. The lack of uniformity and consistency in transfer pricing
enforcement is an equally important international tax issues (Lowell and Martin, 2010).
Multinational enterprises and internal markets go together. The internalization is
the process of making market within a firm. The internal market of the firm substitutes
for the missing regular (or external) market and solves the problems of allocation and
distribution by the use of administrative fiat. Here Rugman (2006) stated that the
LQWHUQDOPDUNHWLVWKHGHYLFHZKLFKPDNHVWKH01(DVGRPLQDQWIRUFHLQWRGD\VZRUOG
The concept of an internal market is particularly apt if administration within the firm is decentralized,
with powers of control being delegated to the managers of individual plants. In this case control over
the intermediate product actually changes hands as the product moves between plants, though
ownership of the products does not.
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Furthermore, Rugman (2006) argue that internalization is a theory of the MNE

since it encompasses within itself the reasons for international (as well as domestic)
production. A firm will wish to locate itself abroad to gain access to foreign markets. It
will choose FDI when exporting and licensing are unrealiable, inferior, or more costly
options. Internalization is a device for keeping a firm specific advantage over
worldwide scale. The MNE is an organization that is able to monitor the use of its firm
specific advantage in knowledge by establishing aboard miniature replicas of the parent
company. These foreign subsidiaries supply each foreign market and permit the
multinational to segment national markets and use price discrimination to maximize
worldwide profits. Internalization allows the MNE to control its affiliates and to
regulate the use of the system specific advantage on a global basis.
The essence of internalization is the recognition of market imperfections which
prevent the efficient operation of international trade and investment. It shows that the
MNE has developed in response to exogenous government induced regulations and
controls which negated the theoretical rationale for free trade and private foreign
investment as explanations of international trade and investment. The process of
internalization permits the MNE to overcome the externalities resulting from such
regulations.
As an MNE operate in various host countries, it may encounter problem with
different regulations with its home country, or even with each of host country. The
needs to comply with the laws and administrative requirements which differ from
country to country create additional problems in MNE. The differing requirements may
lead to a greater burden on an MNE, the result in higher costs of compliance compared
with a similar enterprise operating solely within a single tax jurisdiction (OECD, 2010).
In many MNEs, pricing is a sensitive and complex business matter and is often not
within the purview of the tax department. The lack of uniformity and consistency in
transfer pricing enforcement is an equally important international tax issues (Lowell and
Martin, 2010). So, the growth of multinational enterprises presents an increasingly
complex taxation issues for both the tax administrators and MNEs since the varied
taxation regulations for MNEs in different countries can not be viewed separately,
rather addressed in a broad international context.
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For tax administrators, specific problems arise at policy and practical levels. At
policy level, countrise need to reconcile their legitimate rights to tax the profits of a
taxpayer based on income and expense that can reasonably be considered to have arisen
within their territory with the needs to avoid the taxation of the same item of income by
more than one tax jurisdictions. Such double or multiple taxations can impede the crossborder transactions of goods and services as well as the movement of capital. At
practical level, a country's determination of such income and expense allocation may be
hindered by the difficulties in obtaining pertinent data located outside its own
jurisdiction (OECD, 2010).
Aside from representing taxation problems due to the rapid growth of MNEs in
various host countries, MNEs also bring positive influence to it, such as the
improvement of economy, creation of work vacancies and procurement of technology,
as well as trigger the creation of relevant supporting businesses, thereby improving the
public's purchase power (trickle-down effect) (Farazmand, 1999; Feldstein, 2000;
Capra, 2003; Heryanto, 2003; Chevalier, Prasetyantoko and Rokhim, 2006). It is
therefore reasonable for a government of the host country, including Indonesia, to
compete in attracting MNEs' investments in their country.
However, when a country tries to attract the MNEs into their territory, the
existence of MNEs may reduce or even eliminate the power and role of the government
itself, including in the field of taxation. MNEs are often seen as the cause or, at least,
contribute to a strict competition, degradation of social living quality, discontinued
growth, exploitation of workers and resources as well as degradation of ecology in the
countries where the MNEs' representatives operate. This condition is in accordance with
the Mehafdi's research (2000) which states that an MNE only "causes costs but does not
create value", thereby ignoring the ethical aspects in it.Various attempts which have
been made by the government to ward off the negative impacts of MNEs' presence and
at the same time protect the domestic taxation interests have failed to defend against the
fiscal termites3 (Tanzi, 2000); or in other words the adaptations carried out by the
3
Fiscal termites according to Tanzi (2000) consists of eight phenomenons, such as (1) the rapid growth
of electronic trade and transactions, (2) the use of electronic cash (e-cash) which substitutes real money
in a routine transaction performed by a company or an individual, (3) Transactions / trades between
organizations under the same mother company by MNEs at international level, (4) off-shore financial
centers and tax havens which enable the establishment of conduit company as a special purpose vehicle
(SPV), (5) The development of derivatives and hedge funds instruments performed in tax havens
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national taxation system tend to be slow and weak compared with the rapid flow of
globalization in a certain country.
The main focus on MNEs revolves on how they operate to maximize the overall
profit of the group by evading taxes and conducting transfer price. The internal prices
(or transfer prices) of the firm lubricate the MNE and permit the internal market to
functions as efficiently as a potential (but unrealized) regular market. Cross-border
WUDQVDFWLRQ LV FKDUDFWHUL]HG DV 01(V Rperation among its units in various countries.
Such transactions almost always involve related-parties within the MNEs group (Anctil
and Dutta, 1999; Mehafdi, 2000; Tanzi, 2000; Durst, 2002).
In Indonesia, MNEs with vertical FDI activities generate different levels of
business units in various host countries, where the MNEs take advantage of the different
costs of production and use intra-firm transactions to connect production locations in
various host countries. This activity generally occurs in long-term investments and
requires supervision by the company's management in each country where the MNEs
established a company. On the contrary, horizontal FDI activities generally include
inter-firm transactions between companies under the same MNE group albeit located in
different host countries. Therefore, both intra-firm and inter-firm transactions in MNEs
are inseparable from each other. Both drive the operations of multinational enterprises
in international trade.
The intra-firm and inter-firm transactions are established to generate maximum
and optimum profit to MNEs, by means each part of the MNEs group is encouraged to
create a reasonable transfer price scheme in a transaction between MNEs' parties. The
determination of reasonable transfer price scheme in an intra-firm transaction will result
iQ ZKDW 'XUVW UHIHUUHG DV WKH VKDGRZ SULFHV the price that based only on
production costs and excluding the margin of product. Therefore, the essence of intrafirm and inter-firm transactions is to determine an arm's length price for transfer pricing
practices (Mehafdi, 2000; Durst, 2002).
countries, (6) inability to tax financial capital, (7) increasing amount of works performed by Tax payers
outside the boundaries of a country, (8) increasing number of Tax payers purchasing luxury goods in
foreign countries, especially those which impose low tax tariff on luxury goods.
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C. OECD's Guidelines as a Consensus in International Taxation Issues.

One major consequence of the globalization movement was the emergence, in
late 19
th
century, of a novel strategic problem among nations: how divided is the
international income tax base in the absence of a centralized authority (Baistrocchi,

2006). Developed countries eventually reached a fundamental consensus on how to
solve this problem. That consensus is currently embodied in the Organization for
Economic Cooperation and Development (OECD), an international organization
comprised of 34 countries, as it member, which have accepted the principles of
representative democracy and free market economy. OECD's mission is to create
policies which will improve the economic and social lives of people throughout the
world. OECD (2012) has assisted governments around the world in anticipating
economic, social and governance challenges in face of the economic globalization.
In international taxation issues, OECD has two major policies: the OECD Model
Tax Convention on Income and on Capital (OECD Model), and the OECD Transfer
Pricing Guidelines for Multinational Enterprises and Tax Administrations 2010 (OECD
Guidelines). The central role of OECD Model is to minimize international double
taxation by establishing some structural legal fictions to guide the division of
international income tax base of MNEs. By the consensus, developed countries created
the legal fiction of the separate entity approach. Under this approach, the different profit
unit of a given MNE should be deemed independent enterprises. Developed countries
also agreed that the fiction of the separate entity approach should be enforced by the
arm's length price standard (ALP).
Hagg (1984) shows that OECDV taxation policies also admit conflict of interest
among OECD member. The conflict of interest also affects the taxation system in
Australia (Bentley, 2003) and multinational companies from Japan which operate in
United States (Eden, Valdez and Li, 2005). Indonesia, as one of country with high FDI
realization potentials in Asia for the MNEs that actively operating at international level,
also attempts to adopt the OECD Model and OECD Guidelines in its taxation policies.
OECD Model is commonly implemented in the multiple tax avoidance treaty between
Indonesia and other countries. OECD Guidelines are implemented in order to anticipate
and handle the misuse of TP in Indonesia. Implementation of OECD Guidelines can be
seen in the Director General of Tax Regulation Number PER-43/PJ/2010, amended last
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by PER-32/PJ/2011, and S-153/PJ.04/2010. Those regulations contain concepts transfer

pricing in practice for tax practitioners DQG '*7V DXGLWRUV and how transfer pricing
method can be applied to determine the DUPV-length price principle.
D. Arm's Length Price Dispute: Some Cases in Indonesian Transfer Pricing

Practice
The cross-border practice of determining arm's length price (ALP) by MNEs
brings issues in the relationship between international accounting and taxation. ALP is
one-major issues in practice of transfer price around the world. The principle of ALP
KDVEHHQDGRSWHGE\PDQ\FRXQWULHVDQGWKDQNVWR2(&'KDVEHFRPHWKHGHIDFWR
standard in TP analysis. Several reasons OECD member countries and other countries
have opted ALP. The major reason for the same is that ALP provides broad parity of tax
treatment for MNEs and independent enterprises. This because the ALP puts associated
and independent enterprises on a very equal footing for tax purposes and avoids the
creation of tax advantageous or disadvantageous that would otherwise distort the
relative competition purposes. Other reason is that the ALP has also found to work
effectively in the vast majority of the cases like there are many cases which involve the
purchase and sale of commodities and the lending of money, where ALP may readily
found in the comparable enterprises undertaken by comparable circumstances
(Taxmann, 2012).
When handling TP practices, taxation administrators in various countries have
made attempts to prevent and handle the misuse of transfer price that affects domestic
taxation. Coincidentally, tax practitioners have adopted various methods to implement
reasonable transfer price scheme in every cross-border transaction (Mehafdi, 2000).
Implementation of reasonable transfer price is interpreted by taxation practitioners as an
attempt to evade, not embezzle tax. In various countries, tax avoidance scheme can be
distinguished into the following: (1) acceptable tax avoidance and (2) unacceptable tax
avoidance. However, each country has different views on the transfer price scheme, and
on the criteria of acceptable or unacceptable tax avoidance (Darussalam and Septriadi,
2008).
The differences in understanding and paradigm of tax avoidance in the TP
practice brings an explorative question whether an arm's length price scheme only has
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the purpose of avoiding tax (with no business purpose) and taking advantage of the
existing taxation provisions' weakness can be justified? This question is the basis of
long-term debates between tax administrators and practitioners in many countries and
generates a pejorative sense of TP practice.
Transfer pricing phenomenon at national and international level has prompted
tax authorities' sensitivity in various countries, including Indonesia. Directorate General
of Tax (DGT) of Indonesia is based on Article 24 of Per-48/PJ/2010 on November 3rd
2010 develops a special team tasked in handling TP issues. The team consist the
accounted person in Directorate of Taxation Regulations II, Directorate of Audit and
Collection, and Sub Directorate of Audit for Special Transaction, such as Transfer
Pricing Audit (Darussalam and Septriadi, 2008; and Yani, 2010). Some regulations
promulgated by team are the implementation of sanction, documentation requirements
as well as audit on company which have indication in performing TP practices.
Furthermore, tax DGPLQLVWUDWRUV gives a larger and more in-depth review of the changes
in taxation regulations used in managing 01(V cross-border transaction in
international trade (Owens, 1993; Lodin, 2000; Mehafdi, 2000; Asher and Rajan, 2001).
In Indonesia, rigid regulations created by the DGT are based on an
understanding that transfer price is a way to evade tax conducting by a MNE in their
transactions with its overseas affiliates. Consequently, the company will appear to have
incurred losses or slim profit, and therefore pays a smaller income tax than it should
(Yani, 2010). Such condition is an indication for DGT to perform transfer pricing audit
due to anomalies within the company that incurring losses or slim profit, but still
survive and not become bankrupt. During the transfer pricing audit, DGT generally
emphasizes on the method of determining DUPV-length price of a certain type of goods
sold, intangibles, or services provided to affiliates. In various audit cases, they found
that the MNEs sold goods and intangibles, or provide services to its affiliates at price
lower than to an independent party (Anonym, 2002).
However, some cases in transfer pricing cannot be solved during the audit. It
will require settlement at tax court level. In Indonesia, the trials of transfer pricing cases
are open to public, but only few cases are published in media. Several research in thesis
and dissertations generally anonymize the name of the company to cover the identity of
multinational companies practicing transfer pricing and incurring losses to the
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government. Even so, there are several transfer pricing cases revealed in publications,
such as those performed by PT Asian Agri Indonesia, PT Adaro Indonesia, PT Unilever
Indonesia, Tbk., and PT Toyota Motor Manufacturing Indonesia.
PT Asian Agri (AA) is the subsidiary of Raja Garuda Mas (RGM) Corporate
Group. Its case began when DGT conduct an audit on the Annual Income Tax Return
(SPT) for the year 20012006. The result shows that PT AA has pay less corporate
income tax than it supposed by audit result, which it allegedly incurred losses to the
State by such amount of IDR. 1,34 trillion. In its attempts to evade tax, PT AA
employed three methods as follows: (1) abuse of transfer pricing methodologies, (2)
fictional hedging transactions, and (3) shadow prices. All three methods were applied in
every transaction performed between PT AAI and its affiliates (Fuadah, 2008).
PT Adaro Indonesia (PT AI), the subsidiary of PT Adaro Energy, Tbk, allegedly
committed tax evasion by conducting sales price of coal below the international FRDOV
market price to Coaltrade Services International Pte.Ltd. for year 2005-2006. The latest
company is an affiliate of PT Adaro Energy, Tbk. An estimated IDR 9 trillion of
transaction was hidden throughout the sales, and the tax authorities lost up to IDR 4-5
WULOOLRQ RI WD[ IURP UR\DOW\ IHHV ZKLFK LQGLFDWHG WKH SULFH LV QRW DUPV-length by
application of different transfer price method (Gunadi, 2008 and Anonymous, 2008,
2009).
Transfer price also performed by PT Unilever Indonesia, Tbk (PT UI). PT UI is
the largest consumer good company in Indonesia which allegedly performs abuse
transfer pricing by using Transactrional Net Margin Method (TNMM) in determine the
arPV-length price for the royalty fees. In other side, DGT audit use Profit Split Method
(PSM) to justify it price. This differentiation choosing and applying method result in
different amount tax liabilities to PT UI. According to DGT audit result shows that PT
UI must pay IDR.155 million to cover the lack of tax payment for the year 2006-2010
(Dharma, 2012).
The latest published case on transfer pricing occurs in PT Toyota Motor
Manufacturing Indonesia (PT TMMIN). The transfer pricing trials were closed on 2011,
but the verdict is not yet issued to this day. The dispute with TMMIN occurred due to
the corrections made by the DGT on the car sales and royalty fee by TMMIN in Tax
Return 2008. Cars manufactured by PT TMMIN are first sold to PT Toyota Astra Motor
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(PT TAM), and then from PT TAM to Auto 2000 before they reach the end consumers.
,Q WKH FRPSDQ\V 7D[ 5HWXUQ 37 700,1 VWDWHG WKDW WKHLU VDOHV KDYH UHDFKHG
over IDR 32.9 trillion, but the DGT corrected it into IDR 34.5 trillion, resulting in a
discrepancy of IDR 1.5 trillion, which means that TMMIN still has to pay IDR 500
billion of income tax to the State. The DGT highlighted the sales of Toyota Fortuner,
Kijang Innova and Toyota Dyna cars in 2008 from PT TMMIN to PT TAM are below
the manufacturing costs. Fortuner type G is sold to PT TAM in the amount of IDR 166
million per unit, or 4% below its manufacturing cost. Kijang Innova type G-matic was
sold to PT TAM for a price of IDR 108 million or 4-5% below the manufacturing costs.
In the case of royalty payment, PT TMMIN's profit before tax is reduced after 2003 due
to royalty payment and purchase of raw materials. This is due to the separation between
assembly and distribution into two affiliates. Before 2003, Toyota Astra manufacturing
was joined by its distribution division under the name of PT TAM. However, after
2003, the assembly department established its own by PT TMMIN, whereas the
distribution and marketing is handling by PT TAM (Idris, 2013).
Based on the above cases, the main issue in transfer pricing case is the different
method used for calculating the arm's length price. This issue becomes the fundamental
tax disputes between tax administrators and tax payers. In Indonesia, based on some
issues above, WD[ GLVSXWH LQ GHWHUPLQLQJ WKH DUPV-length price essentially is the
interpretation matters, both for tax authorities and taxpayers during the tax audit and at
tax court. Method compatibility basically depends on the judgment of both the tax
authorities and practitioners. The selection of transfer pricing method, on de facto basis,
is based on the methods stated in the OECD Guidelines.
The OECD Guidelines in 1995 mentions that the hierarchical traditional
methods aVWKHEHVWPHWKRGLQGHWHUPLQHWKHDUPVOHQJWKOver the time, the practical
issues of selection and GHWHUPLQWDWLRQ DUPV-length price by using traditional methods
arise in various countries. It prompts the OECD to make several adjustments to its
transfer pricing policy. One of the adjustments performed in the 2010 OECD Guidelines
is the application of WKHPRVWDSSURSULDWHPHWKRG in determine the DUPV-length price
for TP practices.
In Indonesia, TP cases mentioned above still revolve around the differences
application TP method between the DGT and taxpayers (including practitioners) in
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determining the DUPV OHQJWK SULFH IRU UHODWHG-party transactions within the MNEs
group. The transfer pricing method selected by the DGT in determining the ALP for
01(V WUDQVDFWLRQV EHFRPHV WKH EDVLV IRU WKHLU WD[ FRUUHFWLRQ 2Q WKH RWKHU KDQG
MNEs, as taxpayer, have different method from that applied by the DGT. The
differences of TP method employed to determine DUPV-length price basically shows a
gap in the understanding and interpretation of each party in transfer pricing practices.
Despite, the guidance in selecting transfer pricing method WRGHWHUPLQHWKHDUPV-length
price already exists within the OECD Guidelines, and is already promulgated for
application in Indonesia through PER-43/PJ/2010, as was amended last by PER32/PJ/2011, and S-153/J.04/2010.
THE
GAP
2) $506 /(1*7+ 35,1&,3/(:
UNDERSTANDING
TRANSFER PRICING +(50(1(87,&632,172)9,(:

Much of the transfer pricing literature originates from the United States, since
the U.S. TP regulations promulgated in 1994 become one of TP regimes which
governing intercompany tangible and intangible property transfers, and in combination
with the Temporary Regulations governing services issued in 2006 (King, 2009). There
is obviously scope for researchers from other countries to make relevant contributions to
tax policy and academic research by extending prior research to other countries. The
accounting profession has long been very supportive of accounting research in general,
and this includes tax research. However, in order for the boundaries of behavioral tax
research to be extended, the cooperation tax agencies must be enlisted.
It must be noted that tax professionals include both practitioners and tax
authorities. Until now, research has been one-sided as academics have only had research
access to practitioners. Ther only a few published studies where researchers have
published work using tax authorities (Hansford and Hussey, 2000; Lamb, et.al, 2005).
Therefore, further research which compares both taxpayers SHUFHSWLRQV DQG
SUDFWLWLRQHUV SHUFHSWLRQV RI WD[ VHUYLFHV FRXOG KHOS LQ GHYHORSLQJ D EHWWHU
understanding RI WD[SD\HUV QHeds and reduce any tax expectation and interpretation
gap. To do this successfully, it will be necessary to have input of an interdisciplinary
range of professional researchers and commitment to a long-term strategy in relation to
15
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the integrity of the tax system. King (2009) stated that future partnerships between
academics and tax authorities would seem highly desirable.
One of field in taxation research is transfer pricing, which mostly discuss about
WKH PHFKDQLVP RI GHWHUPLQLQJ WKH DUPV-length price (Halperin and Srinidhi, 1991;
Edlin and Reichelstein, 1995; Alles and Datar, 1998; Anctil and Dutta, 1999;
Kachelmeier and Towry, 2002); abuse transfer pricing in business and taxation practice
(Durst, 2002; Eden, Valdez, and Li, 2005; Exbrayat et.al, 2010); and transfer pricing
and its ethic as international tax issue in relation to foreign direct investment activity by
MNEs (Mehafdi, 2000; Tanzi, 2000; Asher dan Rajan, 2001; Deprez, 2003; Paris, 2003;
Eden and Smith, 2011).
Why is there such critical focus on transfer pricing? Because transfer pricing is
the means of allocating income and expense of the members of an MNE among the
countries in which it does business. In other words, transfer pricing methodologies
reflect the position that the MNE uses to report its income or loss in each country. The
role of the MNE is to define appropriate methodologies, subject to examination by each
MXULVGLFWLRQVWD[DGPLQLVWUDWLRQ
To most people, regardless of professional background, transfer pricing seems
vague and ambiguous. Why? Because transfer pricing is art, not science (Lowel and
0DUWLQ7KHGHILQLQJFULWHULDDUPVOHQJWKSULFHVWDQGDUGLVREMHFWLYHLQWKHRU\
but highly subjective in practice because the critical issues involve evaluation of
functions performed and risks assumed. In other words, transfer pricing is a world of
grey, not black or white.
The conventional international approach to dealing with transfer mispricing is
WKURXJKWKHDUPVOHQJWKSULQFLSOHWKDWDWUDQVIHUSULFHVKRXOGEHWKHVDPH as if the two
companies involved were indeed two unrelated parties negotiating in a normal market,
and not part of the same corporate structure. The OECD and the United Nations Tax
&RPPLWWHHKDYHERWKHQGRUVHGWKHDUPVOHQJWK SULQFLSOH and it is widely used as the
basis for bilateral treaties between governments. Many companies strive to use the
DUPVOHQJWKSULQFLSOHIDLWKIXOO\0DQ\FRPSDQLHVVWULYHWRPRYHLQH[DFWO\WKHRSSRVLWH
GLUHFWLRQ,QWUXWKKRZHYHUWKHDUPVOHQJWKSULQFLSOHLVYHU\KDUGWR implement, even
with the best intentions (Sheppard, 2012).
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In order to extend research in transfer pricing which has uniqueness by

elaborating interdisciplinary approach, therefore, this research is admit to capture and
H[SORUHWKHJDS (the grey area) LQDSSOLFDWLRQRIDUPV-length price principle by means
of hermeneutics. Hermeneutics in transfer pricing cases is the (proper) approach for
understanding and interpretation, as it tried to drive simultaneously two of
understanding areas: (1) the issue of what is involved in understanding an event as a
text, and (2) the issue of the essence of understanding itself (Palmer, 2005).
Furthermore, understanding of the text is sometimes beyond the text itself. An ongoing
effort associated with its understanding textual phenomenon has established
hermeneutics as a potential method for all disciplines, particularly in the social sciences.
Study of hermeneutics applied in this paper is to understand the interpretation
gap of DUPVOHQJWKSULFH(ALP) principle in ,QGRQHVLDQV73SUDFWLFH. The authoritative
statement of the ALP is found in paragraph 1 of Article 9 of OECD Model Tax
Convention as follow:
:KHUH WKH FRQGLWLRQV DUH PDUH RU LPSRVHG EHWZHHQ WKH WZR DVVRFLDWHG
enterprises in their commercial or financial relations which differ from those
which would be made between independent enterprises, then any profits which
would, but for those conditions, have accrued to one of the enterprises, but, by
reason of those conditions, have not so accrued, may be included in the profits
ot that enterprise and taxed accordingly.
Understanding of ALP principle, as it defined in OECD Model, is problem of

textual interpretation that creates the gap of interpretation among tax professionals,
especially in Indonesia. The interpretation gap includes two different dialectic
processes: (1) the event of understanding text (OECD Guidelines and the Indonesian
Income Tax Act and other regulations associated with TP), and (2) the process to
explore the essence of understanding and interpretation. Contradiction between the
ideas of text with the reflection of the interpreter occur both in those process. Interpreter
in this context are the professionals of Indonesian taxation. Interpreter is a person who
has a better understanding of the 73V concept, which it can be influenced by he/she
cultural background, life experiences, and practices in the taxation. Therefore, when the
17
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interpreter tries to understand and interpret of a text, he actually did dialectic interaction
of his/her thoughts with the ideas (concept) that appearing in the text. Thus, the
interpreter will fully understand the text based on him/her practical experience and
knowledge.
The application of ALP in transfer pricing practice for both taxpayers and tax
authorities in Indonesia is based on same text: the OECD Guidelines and its TP
regulation, however, the interpretation of it principle essentially admit different issues in
the oral pronunciation, a reasonable explanation, and transliterations from other
languages (English). All interpretation issues of the ALP principle led to variations in
the taxation practice.
$VDPHWKRGWR XQGHUVWDQGWKH JDSLQ $/3VLQWHUSUHWDWLRQ, the first step is by
exploring the root of word hermeneutics7KHZRUGcomes from the Greek, consist of
the verb hermeneuein (interpret) and nouns hermeneia (interpretation). All hermeneutics
process are contained in three basic meaning of hermeneia and hermeneuein: (1) to
express, (2) to explain, and (3) to translate . Those three basic meaning can be
UHSUHVHQWHG E\ WKH IRUP RI WKH (QJOLVK YHUE WR LQWHUSUHW The interpretation gap of
DUPV-length principle among tax professionals standpoints will be explain in passages
below by using those basic meaning in hermeneutics process.
The first basic meaning of hermeneuein is to express words; the form of oral
spoken of the taxation professionals. Things to consider is that the expression of the
perpetrators of taxation in TP case is the form of interpretation. The professionals
expression is based on understanding of their knowledge and experiences. In this
context, verbal utterance tended to have magical powers in the form of expression of the
speaker, so that the purpose of verbal spoken can be easily understood by his
interlocutors. Thus, expressivity is often lost in the written language.
The perpetrators of Indonesian taxation are both express the ALP principle in
oral pronunciation and also understanding the meaning of it before they spoke.
Interlocutors, as an interpreter, must understand the "expression" of spoken language
and should be able to grasp the meaning of the concepts in the speaker's sentences.
Therefore, verbal interpretation of has two dialectic sides, which in one side speaker
requires an understanding in order to express it, and understanding itself comes from the
18
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speaker's interpretation of his/her readings as the other side. Those process, according to
Ricoeur (2012), shows dialectical hermeneutical circle.
The second basic meaning of hermeneuein is to explain; focusing that
interpretation is a form of explanation which emphasizes the aspects of discursive
understanding. 7R H[SODLQ focuses on the expalantion rather than expressive
interpretation. The most essential thing of the verbal spoken are not "say something",
but rather to explain something, rationalize, and make it clear to be understood by others
(readers or interpreters). Therefore, one can express something without explaining it.
Expressing something is a form of interpretation, and explain something is also a form
interpretation (Palmer, 2005).
The ALP pinciple that put forward by the taxation professionals is a message
which not only bring something to express, but also contains an explanation. As a
message, ALP is telling something about the situation, which is something not
previously described by the expression. Expression regarding the ALP shown by DGT
and taxpayers or practitioners, either during the tax investigation or the tax court is
message that describes the nature of the existence of a gap in the interpretation.
HermeneuticV explanation advises that meaning is a matter of context (Palmer, 2005).
In this case, at the time tax authorities and practitioners do explanation, they need to
have pre-understanding of the ALP in TP practices and issues before they try to explain
it. Thus, ALP principle has its meaning only in the specific context, the transfer pricing
context. So, an explanative interpretation makes us aware that explanations itself are
contextual and horizontal.
In order to execute pre-understanding activities, DGT and tax practitioners have
a role as a reader and also an interpreter of OECD Guidelines, as a text. Those roles
imply that the taxation professionals should undertake the pre-understanding activities
of text and understand its context before they can enter the horizon meaning of the text
itself. The process of understanding the OECD Guidelines are the center point of the
dialectical process; in which for any conditions the partial pre-understanding somehow
used in the early stages of understanding and also in its process hereinafter. As the
current transfer pricing regimes are embodied in the OECD Guidelines; thereof need
LQGLYLGXDO 2(&' PHPEHU FRXQWULHV LQWHUSUHWDWLRQV DQG DOVR RWKHU FRXQWU\-specific
ODZV DQG UHJXODWLRQV 7KHVH WUDQVIHU SULFLQJ UHJLPHV IDLOXUH WR SURYLGH WKH UHTXLVLWH
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level of certainty regarding corporate tax liabilities can often be traced directly back to
the flawed economic underpinnings of specific transfer pricing methods (King, 2010).
The law in essentially all countries is based on the principle of the OECD Guidelines,
whether acknowledged or not, and whether or not specific country is a member of the
OECD. There are few outliers, some of which are important countries from an
international business standpoint. The interpretation of these principles varies from
country to country, and amelioration of double taxation is one of the main purposes of
tax treaties (Lowell and Martin, 2010).
Last basic meaning of hermeneuein is to translate. Interpretation of the OECD
Guidelines has the same meaning to translate it because the text is not in the language of
the perpetrators as a reader. Difference language between text and it readers reflect
horizon impact, that is unavoidable in hermeneutics and in its dialectical conditions.
Translation process of OECD Guidelines makes us aware of the fact that language
contains the interpretation of the world. Most of Indonesian TP regulations are translateform from OECD Guidelines, as it seen in PER-43/PJ/2010 amended last by PER32/PJ/2011 and S-153/J.04/2010. In transalation process we can see language as a real
treasury of cultural experiences and as a place where every human being exists in it.
Through language, humans also may have a vision of their world (worldview).
Translation activity is the heart of hermeneutics; therefore there are always two worlds
in translation process, such as the text and the reader (Palmer, 2005).
Continue in developing the hermeneutic as a method of understanding, Pul
Ricoeur, as one of hermeneutic philosophers, is trying to use hermeneutic to approach
the interpretation action. He believes that hermeneutics is the way to philosophical
reflection, where reflection itself can not be separated from the conflicts of
interpretation. Ricoeur explains that appropriation action occur in the process of
interpretation, which means we make something that previously alien to become our
own. So, interpretation, as tax professionals interpret the OECD Guidelines, can
described as a process of uniting, equalizing, and contemporaring; that may given a way
to the emergence of reflection because the appropriation is tied E\WKHWH[WVDELOLW\ to
'open up' the world (Ricoeur, 2012).
Developing a theory of interpretation, Ricoeur trying to underly his thinking
with the dialectical method to see how events and meaning dialectics each other through
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discourse. Discourse is an event and meaning as well (Ricoeur, 2012). Therefore, the
validity of the discourse not only transhistorical and vanished, but also it can be
identified and re-identified. OECD Guidelines is a form of discourse, which it has role
as an event (practical) of international taxation in many countries, also it contains
meaning for all reader (tax professionals in member and non-member countries) to be
interpret. As a discourse, OECD Guidelines can be re-expressing in other words, or can
say it again with another language, or can translate it from one language to another.
Through this whole transformation, the OECD Guidelines can maintain its own identity
in international tax phenomenon.
Event, as form of discourse, is a person who speaks (speaker). In this case,
speakers are DGT as tax authorities, tax consultants, and taxpayers. As an event, every
speaker are referential (about something, e.g. ALP principle), self-reference (said by
someone, e.g. DGT or tax practitioners), temporal (say at a particular moment or
moments, e.g. at TP audit or TP court), and communicative (say to others, e.g. DGT to
tax practitioners, vice versa, or tax professionals to judges in tax court). Meaning of
speech is what LWV meant by the speaker and what the meaning in sentences of speech
(Kaplan, 2003). Dialectic between event and meaning occurs in the discourse on speech
of speaker. Every discourse is a series of sentences, where each sentence is
characterized by a predicate. In this case, the predicate denotes a kind of quality, degree
of something, and form relationships (Ricoeur, 1981). Thus, discourse is a synthesis of
two functions, namely the identification and predicate. Dialectic event-meaning and
meaning-reference not only raises discourse of speech, but also discourses on writing
(text). A text is formulated by relation between discourse and distanciation4. Text as a
form of discourse also shows the fundamental characteristics about the historicity
(limitation and temporal) of human experiences in and through communication.
As written discourse, a text can be characterized by two main features: the
category of production and the relationship between speech and text. The text carries the
distanciation terms which are of positive and productive, where the text is not only a
4
Distanciation is a taking-space (spacing) process, which means a moment or event can be part of the
text through a communication process and self-understanding. This concept assumes that a text has
been interpreted by it readers continuosly, and coincidely, the reader has to elaborate and analyze the
meaning of the text without able to ask to the author. Thereof, liberating the text from it author,
-<
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problem to be solved, but rather a historical requirement for understanding (Ricoeur,

2012). OECD Guidelines as the world of the text and the world of the readers (tax
professionals) simultaneously are connected by the act of reading, which appears as the
intermediary link between text and history. By responding to the text (OECD
Guidelines), the reader does not only enter into a dialectic adventure, but in addition
becomes a reader of him/herself. As mentioned by Uggla (2010) that the hermeneutics
of the text and the hermeneutics of the self are coincide.
RicoeurV further effort is to expand the scope of interpretation into the realm of
social science. Ricouer WU\ WR DSSOLHG :HEHUV WKRXJKW that the object of the social
sciences is a meaningful action of individual. Therefore, the development of
hermeneutic method indicates a course of action to resolve the classic conflict, such as
the opposition between explanation and understanding, or between the motives and
causes. He argued that (1) the action is also an element forming meaningful text, and (2)
social science methodology is essentially the same as the procedure for interpreting the
text (Ricoeur, 2012).
The action of tax professionals is forming the meaningful ALP principle in
OECD Guidelines. The question to be resolved is: how should a cross-border transfer
price be set among related parties, be it for goods, services, capital, or intangibles? The
answer is most of developed world is the arm's-length price standard. The ALP
principle or standard requires that intercompany prices be set as if the related parties
were independent unrelated parties. For many decades, governments and tax payers
have struggled to define the ALS in actual operations. The primary reason why
JRYHUQPHQWVKDYHGHYHORSHGWKHDUPVOHQJWKVWDQGDUGLVWKDWWKH\GRQRWEHOLHYHWKDW
01(VVHWWKHLUWUDQVIHUSULFHVDWDUPVOHQJWKEXWUDWKHUHQJDJHLQZLGHVSUHDGWUDQVIHU
price manipulation, that is, the over or under-invoicing of prices for intrafirm
transactions (Eden and Smith, 2011)
Resolution of the ALP principle interpretation issue in any specific TP practice,
large or small, occurs in a world in which there is no right or wrong answer. Lowell and
Martin VWDWHG WKDW transfer pricing is not black or white, but grey. Tax
authorities may see the situation far differently than MNEs. This is not only possible,
but predictable, as these parties start from opposite ends of spectrum. MNEs seek the
lowest global effective rate possible to be competitive in their industry, often with
22
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companies based in low-tax jurisdictions that have achieved a striking low global rate.
At the other end of spectrum are the tax administrations, whose aim is to defend their
tax base to assure that each MNE pays its fair share of tax from its global operations in
the country.
TP is a quintessential three-way contest, pitting tax administration against tax
administration, in the case of bilateral treaty-country matters, with the taxpayer often
occupying the position of stakeholder in the middle. If the taxpayer doing business in
two or more treaty countries, it has assumed tax-paying obligations in each jurisdiction.
Allocation of income between jurisdictions is the role of transfer pricing. In this threeway contest, each party has its own concerns (Lowell and Martin, 2010).
Thereof, interpretation of ALP principle as a form of human WD[SURIHVVLRQDOV
action is also aQopen work, which its meaning is open to infinity because the action
opens the possibility for new references and have a new relevance toward interpretation.
In addition, human actions are also looking forward to new interpretations that will
determine its meaning in later (Ricoeur, 2012). So that, all the events and actions that
have important meanings will always be open to form a practical interpretation through
current praxis. Human action is also open to anyone who can understand action as a
dialectic form of event and meaning.
SUMMARY
Transfer pricing, for tax purposes, is the pricing of intercompany transactions
that take place between affiliated companies, such as in group of multinational
HQWHUSULVH7KH73SURFHVVGHWHUPLQHVWKHDPRXQWDWDUPVOHQJWKSULFHRILQFRPHWKDW
each party earns from that transaction. Transfer pricing is used by multinational
enterprises to minimize worldwide taxation, which means to transfer the tax burden
from the higher tax-rate country to the lower tax-rate jurisdiction. Transfer pricing
become prominent issue in international taxation. Current transfer pricing regimes are
embodied in OECD Model and OECD Guidelines. The OECD TP Guidelines for
multinational enterprises and tax administrations provide internationally accepted
JXLGDQFHRQWKHDSSOLFDWLRQRIWKHDUPVOHQJWK price principle set out in Article 9 of the
OECD Model Tax Conventions. Several advantages of this principle include (1) wide
reception by many countries, since it is considered as an international taxation
23
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consensus formulated by OECD, (2) an objective principle based on comparative data

for similar transactions between independent parties, (3) neutrality principle by putting
affiliates and non-affiliate companies in the same position as the separate entity
approach, (4) income allocation based on economic reality, and (5) proven to be
available for implementation in various TP cases in many countries.
ALP principle embodied in all Indonesian tax treaties and income tax
regulations. It has been explicitly adopted from Article 9 of the OECD Model Tax
Convention. Virtually, the every major industrial country takes the ALP principle as its
frame of reference in transfer pricing cases, as in Indonesia. Despite the advantages, the
ALP principle arise difficulty in practice. Major disputes among tax professionals in tax
audit or even court, essentially, regarding the different interpretation of ALP principle.
This creates a gap between tax practitioners and tax authorities. The gap becomes wider
as development in TP practice in international area. This paper offer hermeneutics, as
one of method, to understand the interpretation gap of ALP principle in Indonesian TP
practice. The three basic meaning of hermeneutic process become the first step in
showing the gap of ALP interpretation among tax professionals in Indonesia. The gap
then expands E\5LFRHXUVLQWHUSUHWDWLRQtheory which elaborates the interpretation with
WKHPHDQLQJRIKXPDQDFWLRQHVSHFLDOO\WD[SURIHVVLRQDOVDFWLRQ7KHWKHRU\KDVVRPH
key concepts such as dialectic, appropriation, discourse, and distanciation. Those
concepts have been emerging in interpretation process of ALP principle as dialectic
process to the transfer pricing practice.
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Brawijaya International Conference on Accounting and Business (BICAB) 2013

Department of Accounting FEB Universitas Brawijaya

7+(*$32)$506-LENGTH PRINCIPLE ON TRANSFER PRICING

Brawijaya International Conference on Accounting and Business (BICAB) 2013

Keywords: AUPV-length Price, Transfer Pricing, Taxation, Gap of Interpretation,

Brawijaya International Conference on Accounting and Business (BICAB) 2013

Brawijaya International Conference on Accounting and Business (BICAB) 2013

Brawijaya International Conference on Accounting and Business (BICAB) 2013

TRANSFER PRICING ISSUES IN INDONESIAN TAXATION

Brawijaya International Conference on Accounting and Business (BICAB) 2013

B. How MNEs' Works? An Indication of Transfer Pricing Practice

Brawijaya International Conference on Accounting and Business (BICAB) 2013

Furthermore, Rugman (2006) argue that internalization is a theory of the MNE

Brawijaya International Conference on Accounting and Business (BICAB) 2013

Brawijaya International Conference on Accounting and Business (BICAB) 2013

Brawijaya International Conference on Accounting and Business (BICAB) 2013

C. OECD's Guidelines as a Consensus in International Taxation Issues.

century, of a novel strategic problem among nations: how divided is the

international income tax base in the absence of a centralized authority (Baistrocchi,

Brawijaya International Conference on Accounting and Business (BICAB) 2013

by PER-32/PJ/2011, and S-153/PJ.04/2010. Those regulations contain concepts transfer

D. Arm's Length Price Dispute: Some Cases in Indonesian Transfer Pricing

Brawijaya International Conference on Accounting and Business (BICAB) 2013

Brawijaya International Conference on Accounting and Business (BICAB) 2013

Brawijaya International Conference on Accounting and Business (BICAB) 2013

Brawijaya International Conference on Accounting and Business (BICAB) 2013

2) $506 /(1*7+ 35,1&,3/(:

TRANSFER PRICING +(50(1(87,&632,172)9,(:

Brawijaya International Conference on Accounting and Business (BICAB) 2013

Brawijaya International Conference on Accounting and Business (BICAB) 2013

In order to extend research in transfer pricing which has uniqueness by

Understanding of ALP principle, as it defined in OECD Model, is problem of

Brawijaya International Conference on Accounting and Business (BICAB) 2013

Brawijaya International Conference on Accounting and Business (BICAB) 2013

Brawijaya International Conference on Accounting and Business (BICAB) 2013

Brawijaya International Conference on Accounting and Business (BICAB) 2013

Brawijaya International Conference on Accounting and Business (BICAB) 2013

problem to be solved, but rather a historical requirement for understanding (Ricoeur,

Brawijaya International Conference on Accounting and Business (BICAB) 2013

Brawijaya International Conference on Accounting and Business (BICAB) 2013

consensus formulated by OECD, (2) an objective principle based on comparative data

Brawijaya International Conference on Accounting and Business (BICAB) 2013

Anctil, Regina M. and 'XWWD6XQLO1HJRWLDWHG7UDQVIHU3ULFLQJDQG'LYLVLRQDO

Brawijaya International Conference on Accounting and Business (BICAB) 2013

Brawijaya International Conference on Accounting and Business (BICAB) 2013

)XDGDK /XNOXN  $QDOLVD 7UDQVDNVL-Transaksi yang terjadi dalam Masalah

Umar. 2013. Sengketa pajak Toyota Motor menanti palu hakim.

Brawijaya International Conference on Accounting and Business (BICAB) 2013

Brawijaya International Conference on Accounting and Business (BICAB) 2013

Irma. 2010. Pemerintah bentuk tim khusus transfer pricing.

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