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 the organisation for economic cooperation and development oecd define beps strategies as also exploiting gaps and. The g20oecd base erosion and profit shifting package. 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. The beps project aims to combat base erosion and profit shifting. The taxes base erosion and profit shifting countryby. This action plan, created in response to a request by the g20, identifies a set of domestic and international actions to address the problems of base erosion and profit sharing. 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. Purpose of this project is to solve gaps between tax rules of the several countries used by multinationals to legally transfer their benefits to countries with a minimal or no taxation. Base erosion and profit shifting, beps india action plan. Examples of the tax planning structures of multinational enterprises. Base erosion and profit shifting dubai, 19 21 april 2015 summary this intermediatelevel course provides participants with an indepth understanding of the current discussions around the oecd action plan on base erosion and profit shifting beps and gives them the opportunity to discuss their concerns and potential responses.
To keep things simple, beps refers to tactics used by global corporations to legally shift profits. We are experiencing high call volumes resulting in long wait times. Base erosion and profit shifting australian taxation office. Addressing base erosion and profit shifting contents executive summary chapter 1. Documentation base erosion and profit shifting beps. Oecdg20 base erosion and profit shifting project oecd ilibrary. Base erosion and profit shifting linkedin slideshare. 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. First published in august 2017by policy and strategy, inland revenue, po box 2198, wellington 6140. Action plan on base erosion and profit shifting beps adopted by the g20 in 20. In recent years, the organisation for economic cooperation and development oecd has led the charge to change how the international tax system operates. Base erosion and profit shifting by 2thepoint youtube. On 5 october 2015, the organization for economic cooperation and development oecd released thefinal package of measures to reform the international tax system under the base erosion and profit shifting beps project. 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 tax base of the highertax jurisdictions the organisation for economic cooperation and development oecd define beps strategies as also exploiting gaps and mismatches in tax rules.
Base erosion and profit shifting guidelines stump mncs 14 oct, 2017, 11. Page bepsaction 4 the proposed rule is a mechanical approach changes to interest deduction rules are potentially costly transitional and. This has the effect of reducing a companys tax bill below. This paper provides a survey of the empirical literature on this topic. A roadmap for reform in this editorial, the authors explain the context of this special issue of the bulletin for international taxation. So, best i can tell, neither the oecds base erosion and profit shifting work nor the u. Besides shifting intangibles, mnes financial policies are sensitive to taxation, too. The fundamental premise of the beps project is that a coordination of national responses to beps can both eliminate double nontaxation and protect. Pdf a tax base erosion and profit shifting through transfer. The issue of taxmotivated income shifting within multinational firms or base erosion and profit shifting beps has attracted increasing global attention in recent years. Action plan on base erosion and profit shifting read online.
Base erosion and profit shifting beps deloitte tax. Action 4 limit base erosion via interest deductions and other financial payments develop recommendations regarding best practices in the design of rules to prevent base erosion through the use of interest. In the immediate postcrisis period, profitshifting stands at 2530% of total profits, higher than in the precrisis early 2000s, which was in turn sharply higher than the mere 510% of the 1990s. Base erosion and profit shifting in africa united nations economic. These pages will help businesses navigate what is happening, key deadlines and issues they might want to consider. Base erosion and profit shifting beps refers to 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. Base erosion and profit shifting beps solving gaps between tax rules of the several countries. While there are many ways in which domestic tax bases can be eroded, a significant source of base erosion is profit shifting. The oecd g20 base erosion and profit shifting project or beps project is an oecd g20 project to set up an international framework to combat tax avoidance by multinational enterprises mnes using base erosion and profit shifting tools.
Pdf this paper examined tax base erosion and profit shifting through transfer pricing tbeptp evidenced from nigeria, from the. Oecd 20a, addressing base erosion and profit shifting, oecd. These regulations may be cited as the taxes base erosion and profit shifting countrybycountry reporting regulations 2016. Base erosion and profit shifting, or beps, is the term given to the observed failure of the current international tax framework, by which beps strategies can lead to the disappearance of international profits, and or the diversion of profits away from the country of value creation to other countries with typically low taxno tax. The issue of taxmotivated income shifting within multinational firms or base erosion and profit shifting beps has attracted increasing global attention and has become the subject of an ongoing oecd initiative. Oecd ilibrary addressing base erosion and profit shifting. An increase in the tax rate by 1 percentage point increases the leverage ratio by 0. Base erosion profit shifting beps is a technical term indicating the tax avoidance strategies of mncs that reduces the tax bases for countries.
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. Dec 23, 2017 base erosion and profit shifting by 2thepoint 2thepoint youtube channel covers upsc civilsias ips ifs preparation videos, upsc material, ias material. Usually, a company has to pay tax for its profit or income. In particular, the interactions between national tax legislations and aggressive tax planning should not result in inadvertent double nontaxation.
Addressing concerns related to base erosion and profit shifting annex a. Tax is in the headlines in a manner few could have predicted even a year or two ago. What do we know about base erosion and profit shifting. 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. The terms base erosion and profit shifting are closely related. This has led to a range of issues for businesses to consider, including the oecds base erosion and profit shifting project.
On 19 july 20, the oecd published the 15point action plan on beps in order to address the problem in a holistic manner. Global business models, competitiveness, corporate governance and taxation chapter 4. 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. So this widespread profitshifting is a relatively new phenomenon, and this is despite falling tax. This has led to a range of issues for businesses to consider.
This site is powered by keepeek 360, logiciel phototheque for business. The oecds base erosion and profit shifting actions are well underway with proposals and consultations on all actions. Pdf a tax base erosion and profit shifting through. Base erosion and profit shifting oecd project wikipedia. Base erosion and profit shifting beps deloitte tax beps. Base erosion and profit shifting base erosion shifting of the base residential status resident non resident pay tax only on local income of respective taxable territory profit shifting sourcing of profits to another related entity outside taxable jurisdiction generally in a tax haven country andorra, bahamas, bermuda, british virgin. Domestic tax base erosion and profit shifting beps due to multinational enterprises exploiting gaps and mismatches between different countries tax systems affects all countries. Base erosion and profit shifting beps analysis and india. Base erosion profit shifting ias preparation online. Key tax principles and opportunities for base erosion and profit shifting chapter 5. The project, led by the oecds committee on fiscal affairs, began in 20 with oecd and g20 countries. What is the base erosion and profit shifting beps system.
Pwc beps overview timing and process of action plan base erosion and 9. Tax matters is the place where we discuss tax news, reports and issues. Base erosion and profit shifting by 2thepoint 2thepoint youtube channel covers upsc civilsias ips ifs preparation videos, upsc material, ias material. Base erosion and profit shifting, or beps, is the term given to the observed failure of the current international tax framework, by which beps strategies can lead to the disappearance of international profits, andor the diversion of profits away from the country of value creation to other countries with typically low taxno tax. Addressing base erosion and profit shifting base erosion constitutes a serious risk to tax revenues, tax sovereignty and tax fairness for many countries. Base erosion and profit shifting base erosion and profits shifting beps refers to tax avoidance strategies used by multinational enterprises mnes, which. 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. Base erosion and profit shifting beps the project known as beps base erosion and profit shifting, which is run jointly by the oecd and the g20, aims to combat erosion of the tax base and profit shifting to jurisdictions with low or no tax. Mnes in hightax countries are therefore more extensively financed via debt. Base erosion and profit shifting is a tax avoidance strategy used by multinational companies to shift profits from high tax jurisdictions to ones that have low taxes. Addressing base erosion and profit shifting is a key priority of governments around the globe. Prepared by policy and strategy, inland revenue, and the treasury. Mindful that base erosion and profit shifting hereinafter referred to as beps is a pressing issue.
Base erosion and profit shifting beps is a reduction of corporate income tax base and related corporate income. More than 110 countries agree to work towards a consensusbased solution. Data on corporate tax revenue as percentage of gdp annex b. Base erosion and profit shifting beps is the oecds project encouraged by g20 finance ministers launched in july 20. An australian perspective 1 february 2014 the base 1. 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. Strategies, outcomes and countermeasures 230 summary at the request of the g20 countries the oecd has launched a project on base erosion and profit shifting beps, with the aim to analyze taxminimizing strategies of multinational enterprises mnes and to. Base erosion profit shifting beps refers to tax planning strategies that exploit gaps and mismatches in tax rules to make profits disappear for tax purposes or to shift profits to locations where there is little or no real activity but the taxesare low,resulting in little or no overall corporate tax being paid oecd faqs. Jul 19, 2016 base erosion and profit shifting base erosion shifting of the base residential status resident non resident pay tax only on local income of respective taxable territory profit shifting sourcing of profits to another related entity outside taxable jurisdiction generally in a tax haven country andorra, bahamas, bermuda, british virgin. To implement the beps project, with its objective of greater tax integrity, the oecd identified 15. Base erosion and profit shifting inland revenue department. Developing countries higher reliance on corporate income tax means they suffer from beps disproportionately. Rethinking the corporate tax system is a challenging task. The oecd committee on fiscal affairs, which brings together.
All languages for addressing base erosion and profit shifting. Base erosion is the use of financial measures and tax planning to reduce the size of a companys taxable profits in a country. On 5 october 2015, final reports were released covering 15. The former government had openly commented on the need for stronger rules to combat profit shifting and had endorsed the need for global action. A roadmap for reform bulletin for international taxation, vol. This paper examined tax base erosion and profit shifting through transfer pricing tbeptp evidenced from nigeria, from the perspective of tax avoidance and. Base erosion and profit shifting beps the marketleading tax advisor, we continuously get new insights from the outside world.
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