Indonesia policy observer warns against criminalizing transfer pricing disputes

Public policy observer Yanuar Winarko has warned against the excessive criminalization of transfer pricing disputes in Indonesia, noting that such actions could damage investor confidence.

Winarko explained that transfer pricing is a standard practice in cross-border business, provided it adheres to the arm's length principle as regulated under PMK Number 172 of 2023. He emphasized that authorities must distinguish between legitimate disputes over valuation methods and actions driven by malicious intent. Most transfer pricing issues are typically resolved through administrative channels, such as fiscal corrections, objections, or tax court appeals.

Criminal proceedings should serve as an 'ultimum remedium' or last resort, reserved for cases with clear evidence of intentional wrongdoing, such as document forgery or systematic transaction manipulation. Winarko cited the recent designation of PT Toba Pulp Lestari (TPL) as a corporate suspect by the Attorney General's Office regarding alleged corruption involving transfer pricing and under-invoicing between 2008 and 2025 as an example of where systematic price engineering may justify criminal intervention.