Tax Base Erosion and Profit Shifting (BEPS)

The Group of 20 (G20) nations engaged the Organisation of Economic Cooperation and Development (OECD) to make recommendations for containing international tax base erosion and profit shifting (BEPS). This reflected perceived MNE behaviour of locating profits in low tax jurisdictions and contributing little to tax in proportion to their global pre-tax profits. In the rush for corrective measures, however, governments were quick to conclude that inappropriate tax behaviour of MNEs was endemic. Tax avoidance was not viewed as a phenomenon pertaining to selected sectors or individual enterprises, rather, as a phenomenon afflicting the entire MNE sector. In September 2013, the OECD adopted 15 Action Plans to address BEPS. In October 2015, 15 Actions in 13 final reports were released. In July 2020, the OECD publicly shared the outcomes of a stocktaking exercise of whether signatory countries were meeting minimum standards that they had signed on to for being a part of the BEPS process. It found that countries were collaborating and sharing best practices regarding fiscal policy and tax administration. The report pointed to how standards could be improved for countering BEPS. This chapter examines the success of the Actions in addressing BEPS and country reactions to the BEPS process.