In taxation, there is a term known as tax avoidance. A term used to describe a transaction scheme aimed at minimizing tax burden by taking advantage of loopholes in a country's tax provisions. Such transaction schemes considered to be illegal since they do not comply tax provisions. Tax avoidance is different from tax evasion. Tax avoidance implies to an action that reduce tax payable by violating tax provisions, for example not reporting all sales or increasing the amount of costs falsely. 

Several solutions are needed to reduce tax avoidance by multinational companies with a transfer pricing scheme, and also to avoid double taxation. It is necessary to have tax authority to make sure that related party transaction is made properly referring to an international reference. Due to this, International Tax Regime is required.

As stated in The Oxford Handbook of International Business, it is explained that the International Regime is a functional and behavioural relationship between governments in various countries which is formed in response to problems at the international level regarding a particular issue. This functional and behavioural relationship will actually only have legal force if it is carried out in Tax Treaty Agreement or in existing regulations in the country. Taking into account the balance of laws between countries, the International Tax Regime is starting to be implemented by various countries.

In practice, the International Tax Regime is integrated into a Tax Treaty model. Based on current tasks, at the global level there are two multinational organizations that play a role in formulating International Tax Regime. First is the Organization for Economic Cooperation and Development (OECD) and the United Nations (UN). The task of these two organizations is to publish a Tax Treaty model document as a reference by various countries in formulating Tax Treaty with other countries.

OECD plays a big role in transfer pricing for enacting Article 9 of the OECD Model or known as OECD Transfer Pricing Guidelines for Multinational Enterprises and Tax Administration. This regulation aims to prevent tax abuse and prevent double taxation. 

The principles used in International Tax Transfer Pricing Regime are equality between countries, international neutrality, and equality of Taxpayers from different countries. These three principles become a reference to balance the movement between countries to carry out their respective roles. Removing this principle can lead to the emergence of an imbalance between countries.

Primarily, transfer pricing scheme can only be used by multinational companies compared to independent companies. Multinational companies have the opportunity to carry out international tax planning. Therefore, horizontal equality is needed as a basic principle in the International Tax Transfer Pricing Regime. The stigma of transfer pricing for tax avoidance cannot be justified because the implementation is different. With this regulation, tax avoidance and tax evasion can also be avoided.

It is very important to understand that the issue of taxation can be one aspect that drive activity within the company. Transfer pricing policy should not be immediately suspected as tax avoidance effort, it must be seen from a more comprehensive context. Transfer pricing aims to show the contribution of each party within multinational group of companies, with conditions if the transaction is carried out between independent parties. Transfer pricing manipulation can occur due to a deviation in the value of compensation that must be received by multinational company entities but is not given comprehensively.

Therefore, transfer pricing manipulation must be avoided because it can affect the economy of a country. With the existence of the International Tax Transfer Pricing Regime, it is expected that it can be the first step for multinational companies in various countries to carry out their tax obligations properly. Every right and obligation of each taxpayer can be fulfilled in accordance with the existing regulations in his own country. This role can be an initial step for change and encourage honest behaviour in transactions as well as benefit various parties involved in the transfer pricing scheme.