Observer States Excessive Criminalisation Affects Investor Confidence
Amidst Indonesia’s ongoing economic pressures, law enforcement practices that push every transfer pricing dispute into the criminal realm are viewed as potentially creating a misguided deterrent effect on the national investment climate.
Public policy observer Yanuar Winordko stated that transfer pricing is essentially a common and legal practice in cross-border business, provided it follows the arm’s length principle as regulated in PMK Number 172 of 2023. “The issue is not the existence of transfer pricing itself, but how authorities differentiate between disputes over fair price valuation methods and actions accompanied by genuine malicious intent,” Yanuar said in a written statement on Saturday.
He explained that the majority of transfer pricing cases in various countries are resolved through administrative channels, such as fiscal corrections, objections, and appeals in tax courts. Criminal proceedings should serve as the ‘ultimum remedium’ (last resort), pursued only when there is clear evidence of intentionality, such as document forgery or double manipulation between transaction values and goods classification.
Yanuar cited the Attorney General’s Office’s designation of PT Toba Pulp Lestari (TPL) as a corporate suspect in early September 2026, regarding alleged corruption involving transfer pricing and under-invoicing between 2008 and 2025, as an example of how this issue is shifting from pure tax disputes to the realm of corruption crimes.
“The TPL case shows that when there are strong indications of systematic price manipulation occurring over many years, law enforcement does have a strong reason to enter the criminal realm. However, this also serves as a critical test: the public and business actors will judge whether similar approaches are only used for cases with truly strong evidence of intent, or if they are beginning to encroach upon valuation method disputes that are common in multinational business,” said Yanuar.
He emphasised that such major precedents have a dual impact: on one hand, they reaffirm the state’s commitment to closing loopholes in revenue leakage from truly deviant practices; on the other hand, they potentially create excessive concern among investors if the boundary between a “fair dispute” and a “crime” is not clearly communicated to the public.
“When law enforcement is too quick to direct every difference in fair price interpretation into the special criminal realm, the signal received by business actors is not one of firm law enforcement, but of legal uncertainty. And legal certainty is the most expensive commodity for capital owners, especially amidst the current difficult economic conditions,” he said.
Yanuar added that a more proportional approach would involve strengthening preventive instruments such as Advance Pricing Agreements (APA), clarifying the boundary between legitimate tax avoidance and illegal tax evasion, and ensuring that tax authorities and law enforcement work based on objective quantitative evidence rather than solely on state revenue targets.
“Long-term investors can accept reasonable tax corrections. What they avoid is the uncertainty regarding when a business policy might suddenly be deemed a crime,” he noted.
Concluding his statement, Yanuar reminded that strengthening tax governance and protecting state revenue is a legitimate agenda that deserves support. “However, its implementation must go hand in hand with the principle of legal certainty so as not to be counterproductive to efforts to attract investment amidst current economic challenges,” he concluded.