Base erosion and profit shifting (BEPS) is a global problem which requires global solutions. BEPS refers to tax planning strategies that exploit gaps and mismatches in tax rules to artificially shift profits to low or no-tax locations where there is little or no economic activity, resulting in little or no overall corporate tax being paid. BEPS is of major significance for developing countries due to their heavy reliance on corporate income tax, particularly from multinational enterprises (MNEs).
In an increasingly interconnected world, national tax laws have not always kept pace with global corporations, fluid movement of capital, and the rise of the digital economy, leaving gaps that can be exploited to generate double non-taxation. This undermines the fairness and integrity of tax systems. Fifteen specific actions are being developed in the context of the OECD/G20 BEPS Project to equip governments with the domestic and international instruments needed to address this challenge. The first set of measures and reports were released in September 2014. Combined with the work to be completed in 2015, they will give countries the tools they need to ensure that profits are taxed where economic activities generating the profits are performed and where value is created, while at the same time give business greater certainty by reducing disputes over the application of international tax rules, and standardising requirements. For the first time ever in tax matters, non-OECD/G20 countries are involved on an equal footing.
For more detailed information, read our Frequently Asked Questions.
The OECD work is based on a BEPS Action Plan endorsed by the G20 in July 2013, which identified 15 key areas to be addressed by 2015; with 7 actions to be delivered in September 2014. The September 2014 BEPS outputs were delivered in an interim form and, while agreed, were not finalised as they may be impacted by some of the decisions to be taken with respect to the 2015 Deliverables with which they interact. These 2014 outputs will be consolidated with the remaining 2015 deliverables to ensure a coherent package which will be delivered to the G20 Finance Ministers in October 2015, together with a plan for the follow-up work and a timetable for their implementation.
2014 Deliverables (Released in September 2014)
OECD and G20 countries have agreed three key elements that will enable implementation of the BEPS Project:
The technical work on BEPS is being undertaken by the OECD Committee on Fiscal Affairs (CFA) through its subsidiary bodies, namely:
Taxation plays a central role in promoting sustainable development, and developing countries face significant challenges in developing their tax capacities and mobilising domestic resources. Engagement of developing countries in the international tax agenda, including on BEPS, is therefore important, in particular to ensure they receive appropriate support to address the specific challenges they face.
Engagement has been extensive since the beginning of the BEPS Project. Over 80 developing countries and other non-OECD/non-G20 economies have been participating and discussing the challenges of BEPS through
There are number of key areas of work on which the OECD Committee on Fiscal Affairs, through its subsidiary bodies, is currently focusing on. These include:
|• Tax Policy and Statistics
• OECD’s Programme on Tax and Development
• Tax Compliance