Abstract

              Transfer pricing comprises of one part of the management accounting aspects. Recently, it has become one of the main issues in the Malaysian tax perspectives. The pioneer legal case of alleged transfer pricing manipulation that shocked the Malaysian tax world proved to be one of the reasons why this area of business dealings are attracting more scrutiny and supervision. The move made by the Inland Revenue Board of Malaysia (IRBM) to amend the Transfer Pricing Guidelines 2007 to a complete act in 2012 showed such effort hurled to curb any manipulation and malpractice among the related parties transactions in particular among the Public Listed Companies (PLCs). This study aims to examine the potential transfer mispricing practices among the public listed companies in Malaysia through the analysis of the effective tax rate (ETR) and the number of subsidiaries possessed by those companies, especially the tax haven subsidiaries. From a sample of seventy (70) companies consisting of seven (7) industries, the general view of the landscapes of the transfer pricing practices are analysed through the complex arrangement of some companies via their arrays of subsidiaries. The results indicate that PLCs have the alternative to using their subsidiaries as a medium to evade tax since the tax haven countries are also one of the famous location to be utilized by PLCs to erect subsidiaries. However, the argument is not entirely robust since only some company that meet all the criteria of having a low ETR, possessing significant amounts of subsidiaries as well as tax haven subsidiaries. These findings show that the risk indicators based on the OECD Guidelines and IRBM Guidelines shall be used to predict transfer pricing practices among PLCs. The potential results can be used as policy recommendations to relevant authorities in monitoring transfer pricing practices and enhance the collection of tax revenue.