Base erosion constitutes a serious risk to tax revenues, tax sovereignty and tax fairness
for many countries. While there are many ways in which domestic tax bases can be eroded,
a significant source of base erosion is profit shifting. This report presents the
studies and data available regarding the existence and magnitude of base erosion and
profit shifting (BEPS), and contains an overview of global developments that have
an impact on corporate tax matters and identifies the key principles that underlie
the taxation of cross-border activities, as well as the BEPS opportunities these principles
may create. The report concludes that current rules provide opportunities to associate
more profits with legal constructs and intangible rights and obligations, and to legally
shift risk intra-group, with the result of reducing the share of profits associated
with substantive operations. The report recommends the development of an action plan
to address BEPS issues in a comprehensive manner.