Base erosion and profit shifting (BEPS) practices, in which multinational enterprises exploit gaps and mismatches between different countries' tax systems, cost countries 100-240 billion USD in lost revenue annually, the equivalent to 4-10% of the global corporate income tax revenue.
BEPS does not affect all countries in the same way. The contribution of corporate income tax to the total tax revenue of developing economies is significantly higher than in OECD countries: for example, 58% in India, 66% in Malaysia, 52% in Indonesia as compared to 9% in France and the United Kingdom. Developing countries’ higher reliance on corporate income tax means that their tax revenues continue to suffer disproportionately from BEPS, hindering sustainable development.
What needs to be done to end BEPS? OECD and G20 countries are participating in establishing a modern international tax framework to ensure that profits are taxed where economic activity and value creation take place. The OECD/G20 Inclusive Framework on BEPS targets the implementation of 15 measures to tackle tax avoidance, improve the coherence of international tax rules and ensure a more transparent tax environment.