Mindful that base erosion and profit shifting hereinafter referred to as beps is a pressing issue not only for industrialised countries but also for emerging economies and developing countries. Developing countries higher reliance on corporate income tax means they suffer from beps disproportionately. How large is the corporate tax base erosion and profit shifting. The effective tax rates paid by large mne entities are estimated to be 4 to 8.
It is an accepted international tax principle that business income is taxed in the. Newsletter november 2015 on 5 october 2015, the organization for economic cooperation and development oecd released the final reports of the base erosion and profit shifting beps project. Addressing base erosion and profit shifting iterating the need for analyzing the issue of tax base erosion and profit shifting by global corporations. Managing the groups trademark, designs and patents through an entity that applies a lower tax rate to intellectual property, then charging group companies royalties on the use of the brand.
The organization for economic cooperation and development oecd, for instance, noticing tax. Base erosion and profit shifting beps refers to corporate tax planning strategies used by multinationals to shift profits from highertax jurisdictions to lowertax jurisdictions, thus eroding the taxbase of the highertax jurisdictions. Pdf a tax base erosion and profit shifting through transfer. Base erosion and profit shifting beps the requirement for a group to be headed by a company may lead to. Domestic tax base erosion and profit shifting beps due to multinational enterprises exploiting gaps and mismatches between different countries tax systems affects all countries. Subcommittee on base erosion and profit shifting issues. The base erosion and profit shifting beps packages goal was to tackle in a coordinated manner the causes and circumstances creating beps practices. Jul 03, 2019 the convention is an outcome of the oecd g20 beps project to tackle base erosion and profit shifting through tax planning strategies that exploit gaps and mismatches in tax rules to artificially shift profits to low or notax locations where there is little or no economic activity, resulting in little or no overall corporate tax being paid. International corporate tax issues are prominent in public debate, notably with the g20oecd project addressing base erosion and profit shifting beps. Dissertation the impact of the oecds base erosion and profit shifting strategy on current transfer pricing practices clemens grassinger 1 1 introductory remarks 1. The g20 and the base erosion and profit shifting beps project.
The oecd g20 base erosion and profit shifting project or beps project is an oecdg20 project to set up an international framework to combat tax avoidance by multinational enterprises mnes using base erosion and profit shifting tools. International tax manager emea unilateral legislative changes i. The report on dealing with baseline erosion and profit transfer has some basic tax principles and opportunities for baseline erosion and change of profits that are analyzed, such as jurisdiction in. Subcommittee on base erosion and profit shifting issues for. The percentages are somewhat lower than might have been expected given the high level of concernengagement in questions 1 and 2. Beps inclusive framework unucris united nations university. Oecdg20 base erosion and profit shifting project neutralising the effects of hybrid mismatch arrangements addressing base erosion and profit shifting is a key priority of governments around the globe.
There have been notable increases in the netherlands from 61%, france from 44%, switzerland from 59% and decreases in germany from 60%, china from 80% and the uk from 80%. Trademark and technology licensingtransfer pricing. Lately, the frequency of beps has come under intensified scrutiny, particularly in hightax territories. The final package was negotiated by oecd members, the g20 and. Oecdg20 base erosion and profit shifting preventing the. Included in the discussion are the tradeoffs and considerations involved in moving closer to either a pure worldwide tax system or a pure territorial tax system. Isbn 9789264241022 print isbn 9789264241046 pdf series. Addressing base erosion and profit shifting is a key priority of governments around the.
Oecdg20 base erosion and profit shifting addressing the tax. Addressing base erosion and profit shifting read online. In 20, oecd and g20 countries, working together on an equal footing, adopted a 15point action plan to address beps. Several policy options for addressing base erosion and profit shifting are briefly discussed. Base erosion and profit shifting project, oecd publishing, paris. The base erosion and profit shifting beps project, an initiative of the organization for economic cooperation and development oecd and the g20 nations was launched in 20 to address the issues of profit shifting and tax avoidance by multinational enterprises mnes. Base erosion and profit shifting beps refers to tax planning strategies that allow multinationals to take advantage of gaps and mismatches in international tax laws to reduce or shift profits from high tax jurisdictions to low tax jurisdictions and decrease their overall tax burden. These revenue losses have increased substantially in. Oecdg20 base erosion and profit shifting project issn. View beps base erosion and profit shifting research papers on academia. Base erosion and profit shifting oecd project wikipedia.
A roadmap for reform the harvard community has made this article openly available. Taxation is at the core of countries sovereignty, but in recent years, multinational companies have avoided taxation in their home countries by pushing activities abroad to low or no tax jurisdictions. Tax base erosion and profit shifting in africa part 1. Oecdg20 base erosion and profit shifting project oecdg20. What do we know about base erosion and profit shifting. Base erosion and profit shifting the background 9 10 september 20base erosion and profit shifting reform fundamental systemic change consensusbased organisation building a base in nonmember developing countries so heavy burden of broad consensus requirement pressure to observe fundamental principles existing principles include pes. Base erosion and profit shifting beps are taxavoidance strategies that exploit gaps and mismatches in tax rules to artificially shift profits to low or notax locations.
Limiting interest deductions and other financial payments on october 5, 2015, the oecd released fifteen final reports on its project entitled, base erosion and profit shifting. Base erosion, profit shifting and developing countries. Oecds base erosion and profit shifting beps initiative and the global tax reset. In september 20, g20 leaders endorsed the ambitious and comprehensive action plan on beps. Pwc beps overview timing and process of action plan base erosion and 9. In 20, oecd and g20 countries, working together on an equal footing, adopted a. The oecd followed it up with publishing draft action plan on base erosion and profit shifting beps action plan in. Base erosion and profit shifting beps avoidance strategies enable large enterprises to minimise their tax burden, eroding government revenue bases by strategically transferring profits. Base erosion and profit shifting beps recent developments. Beps refers to tax planning strategies that exploit gaps and mismatches in tax rules to make profit disappear for tax purpose or to shift profits to locations where there is little or no real activity but taxes are low, resulting in. The g20 and the base erosion and profit shifting beps. Oecds base erosion and profit shifting beps initiative and the global tax reset 9. Base erosion and profit shifting beps concerns have mostly arisen due to the application of complex tax avoidance structures by transnational corporations to earn stateless3 income, primarily resulting in double non taxation. Global business models, competitiveness, corporate governance and taxation chapter 4.
Base erosion and profit shifting beps analysis and india. Oecdg20 base erosion and profit shifting addressing the. Request pdf base erosion, profit shifting and developing countries international corporate tax issues have now risen to prominence in public debate. Action plan on base erosion and profit shifting action plan on base erosion and profit shifting this work is published on the responsibility of the secretarygeneral of the oecd. To date, business organizations have generally been supportive of beps, believing that a. The opinions expressed and arguments employed herein do not necessarily reflect the official views of the organisation or of the governments of its member countries. The impact of the oecds beps strategy on current tp practices. However, in todays international tax parlance, terms have evolved into more creative and catchy phrases.
Oecd, imf, many initiatives are under discussion, as the oecd action plan on base erosion and profit shifting and the eu action plan to strengthen the. Feb 12, 20 addressing base erosion and profit shifting contents executive summary chapter 1. Base erosion is the use of financial measures and tax planning to reduce the size of a companys taxable profits in a country. The oecd followed it up with publishing draft action plan on base erosion and profit shifting beps action plan in july 20 which came to final fruition in october 2015. Base erosion and profit shifting beps training course. This paper provides a survey of the empirical literature on this topic. Feb 12, 20 addressing base erosion and profit shifting base erosion constitutes a serious risk to tax revenues, tax sovereignty and tax fairness for many countries.
What techniques are used in base erosion and profit shifting. Oecds base erosion and profit shifting beps initiative. Dissertation the impact of the oecds base erosion and profit shifting strategy on current transfer pricing practices clemens grassinger 2 since the impact of these rules has become increasingly significant in recent years, this has led to an increasing amount of work by supranational organizations. Apr 30, 2015 countries indicate that profit shifting is likely an international issue. Base erosion and profit shifting beps refers to a set of tax avoidance practices that deny the tax revenues to a nation by eroding the tax base of the nation where economic activities generating. The base erosion and profit shifting work is only one of the many initiatives currently in progress in response to the current international climate of concern about tax avoidance and tax evasion. Oecds base erosion and profit shifting beps initiative and the global tax reset 5 there hasnt been enough attention to implement strict and mandatory measures to eliminate double taxation whenever tax authorities do not reach an agreement. Oecdg20 base erosion and profit shifting project preventing the granting of treaty benefits in inappropriate circumstances addressing base erosion and profit shifting is a key priority of governments around the globe.
Pdf action plan on base erosion and profit shifting. The g20 asked oecd to address this growing problem by creating this action plan to address base erosion and profit shifting. Oecds base erosion and profit shifting beps initiative and the global tax reset 8 level of csuiteboard engagement on average has not changed since 2018. Beps base erosion and profit shifting research papers. Pdf on apr 1, 2020, olaoye clement olatunji and others published effect of base erosion and profit shifting on revenue generation in nigeria find, read and cite all the research you need on. Oecdg20 base erosion and profit shifting project addressing the tax challenges of the digital economy addressing base erosion and profit shifting is a key priority of governments around the globe. The impact has been particularly damaging for developing countries. The impact of the oecds beps strategy on current tp. Base erosion and profit shifting action plan on base erosion and profit shifting taxation is at the core of countries sovereignty, but in recent years, multinational companies have avoided taxation in their home countries by pushing activities abroad to low or no tax jurisdictions. The oecdg20 project on base erosion and profit shifting beps is the. Base erosion and profit shifting beps recent developments ca t. This paper examined tax base erosion and profit shifting through transfer pricing tbeptp evidenced from nigeria, from the perspective of tax avoidance and from profit shifting manipulative.
This report explains the background to the project, analyses the dynamics of the. In an attempt to respond to challenges associated with base erosion and profit shifting beps, the oecd in 20 launched the socalled beps action plan project oecd, 20. Key tax principles and opportunities for base erosion and profit shifting chapter 5. Action plan on base erosion and profit shifting oecd. Beps, corporate taxation, profit shifting, tax avoidance, cge model. Base erosion and profit shifting some organizations will likely face greater adverse effects than others even among their own peer group.
This plan identifies a series of domestic and international actions. Ostwal the public has always been familiar with the terms tax dodging, tax avoidance, and tax structuring. Neutralising the effects of branch mismatch arrangements. Oecds base erosion and profit shifting beps initiative and. The project on base erosion and profit shifting beps has been the first major multinational effort to reform international tax rules since they were first designed in the 1920s. Pdf effect of base erosion and profit shifting on revenue. Oecd, addressing base erosion and profit shiftingoecd 20, interna tional organizations documentation ibfd, also available at.
Base erosion and profit shifting refers to corporate tax planning strategies used by multinationals to shift profits from highertax jurisdictions to lowertax jurisdictions, thus eroding the tax base of the highertax jurisdictions. One may have probably encountered the terms double irish. Action plan on base erosion and profit shifting en oecd. While there are many ways in which domestic tax bases can be eroded, a significant source of base erosion is profit shifting. The project, led by the oecds committee on fiscal affairs, began in 20 with oecd and g20 countries, in a context of financial crisis and tax affairs e. The organisation for economic cooperation and development define beps strategies as exploiting gaps and mismatches in tax rules. It is often achieved by structuring income to have more favourable tax treatment or by finding ways to write off certain expenditure against taxable income.
In 20, the organization for economic cooperation and development oecd launched an action plan to address base erosion and profit shifting, which culminated in a package of 15 actions, which. The beps action plan arose as a result of a call by the g20 finance ministers on the oecd to develop an action plan to address beps issues in a coordinated and. Base erosion and profit shifting beps kpmg international. Addressing base erosion and profit shifting contents executive summary chapter 1. Corporate tax base erosion and profit shifting beps. Business and industry advisory committee to the oecd. This has the effect of reducing a companys tax bill below what it would otherwise be expected to pay. The issue of taxmotivated income shifting within multinational firms or base erosion and profit shifting beps has attracted increasing global attention in recent years. The profit rates of mne affiliates located in lowertax countries are higher than their groupsaverage worldwide profit rate. Recognising the importance of ensuring that profits are taxed where substantive economic activities. Base erosion and profit shifting beps analysis and india perspective 07 base erosion and profit shifting beps analysis and india perspective 06 tax treaty abuse treaty abuse and in particular, treaty shopping is the most significant source of beps concerns as governments are probing ways to tackle this issue. Oecd ilibrary addressing base erosion and profit shifting. The final package was negotiated by oecd members, the g20 and nonoecd members including nigeria on an equalfooting basis. Pdf a tax base erosion and profit shifting through.
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