What is BEPS????? All That You Should Know About The BEPS……

The world is fast moving towards a globalized economy.The major economies of the world have opened up their borders for the businesses and the businesses have been utilizing these opportunity quite aggressively.However, this has also led to a complex taxation system and those who know the rope have developed a number of fraudulent and immoral practices for tax evasion.

Usually, a firm operating and making profits in one economy shifts them across the borders by exploiting the discrepancies in the tax rules of the country with an aim to take advantage of the lower tax rates of the another country. Consequently, they end up evading tax in the country where the profit is made and the country remains deprived of its share in the profit which has been made within its boundary.

The term BEPS is used to describe the strategies that exploit the loopholes of tax system of an economy to minimize their corporation tax burden, by either making taxable profits “disappear” or shift profits. However BEPS cannot be deemed illegal, they take advantage of inadequacies of different tax rules operating in different economies, which may not be suitable for the current global and digital business scenario.

This results in huge loss of revenues of the country where the profits are made. As per the estimates by the Organization for Economic Cooperation and Development (OECD), economies have been losing 4 to10 per cent of global corporate income tax ($100-$240 billion) revenues annually since 2013. This is a serious matter of concern as global corporate income tax is one of the significant sources of income for an economy especially the under-developed ones.

This has raised some come serious concerns around the world and has initiated a fresh debate to make sure that a company making profits in a one economy does not get away without paying the pertinent tax.

The OECD, under the supervision of G20, has been trying to come up with ways to revise tax treaties, tighten rules, and to share more government tax information under the BEPS project. So basically, the BEPS (base erosion and profit shifting) is an OECD initiative aimed to provide ways of developing a uniform set of tax rules globally. It is a multiple phase initiative including implementation and monitoring along with some remaining standard setting and clarification.

With a view to counter these anomalies,the OECD has developed the BEPS Package of 15 action plans in order to arm the governments with various domestic and international instruments.While countries have been empowered by these tools to make sure that profits are rightly taxed at the place where the profits are being earned,businesses have also been endowed with greater certainty by providing a clear description of the application of international tax rules and standardizing compliance requirements.