Synergy of Pancasila ethical principles and transfer pricing practices for economic sustainability

Abstract

This study attempts to reconstruct the ethical principles of Pancasila with fair transfer pricing practices to create a set of guidelines that encourage economic sustainability in Indonesia, using a qualitative-critical approach. Data were obtained through in-depth interviews with tax authorities, tax consultants, and multinational companies, as well as document analysis using thematic techniques and NVivo 12 software. Findings suggest that although transfer pricing is legally permitted, the practice is often manipulated to suppress tax burdens, thereby reducing state revenues and exacerbating inequality. Integrating Pancasila values—such as fairness, transparency, and cooperation—into tax governance can encourage more ethical corporate behavior and strengthen regulatory compliance. The first, second, and fifth principles of Pancasila serve as important ethical foundations for regulating transfer pricing, promoting social justice, especially given the structural weaknesses in current regulations and enforcement. The study provides recommendations for strengthening the legal framework, increasing ethical awareness, and multilateral cooperation. Theoretically, it can enrich the literature by bridging local ethics and international tax policies, and provide practical implications for reforming transfer pricing governance that supports the country's fiscal resilience, social welfare, and sustainability.