OECD/G20 Base Erosion and Profit Shifting Project

OECD/G20 Base Erosion and Profit Shifting Project
Name	OECD/G20 Base Erosion and Profit Shifting Project
Abbreviation	BEPS Project
Established	2013
Initiated by	Organisation for Economic Co-operation and Development, G20
Purpose	Address tax avoidance by multinational enterprises
Status	Ongoing

OECD/G20 Base Erosion and Profit Shifting Project is an international initiative launched in 2013 to combat corporate tax avoidance by multinational enterprises through coordinated changes to international tax standards. It was spearheaded by the Organisation for Economic Co-operation and Development with endorsement from the G20 leaders and has produced an Action Plan adopted by Council of the European Union, Group of Seven, and multiple United Nations tax experts. The project intersects with national tax administrations such as the Internal Revenue Service, Her Majesty's Revenue and Customs, and the Bundeszentralamt für Steuern, and with supranational bodies like the European Commission and International Monetary Fund.

Background and objectives

The initiative arose from investigations and reports including work by the OECD, analysis by the Tax Justice Network, and revelations from media outlets like The Guardian and The New York Times about structures used by firms such as Apple Inc., Google LLC, and Starbucks. Core objectives include preventing profit shifting to low-tax jurisdictions such as Bermuda, Cayman Islands, and Luxembourg; restoring tax bases of countries including United States, France, and Germany; and improving coherence between standards set by Organisation for Economic Co-operation and Development, United Nations, and regional bodies like the European Union. The project engages stakeholders from PricewaterhouseCoopers, Deloitte, Ernst & Young, KPMG, and civil society groups such as Oxfam and Transparency International.

Key components and action plan

The BEPS Action Plan comprises 15 actions addressing issues like transfer pricing, hybrid mismatches, treaty abuse, and artificial avoidance of permanent establishment rules. Prominent components include revisions to the OECD Model Tax Convention, development of the Multilateral Instrument architecture, and proposals for country-by-country reporting to tax authorities including submissions to Financial Action Task Force and discussions at the World Bank. Actions reference legal doctrines from jurisdictions such as United Kingdom, United States, and Netherlands and engage accounting standards bodies like the International Accounting Standards Board. Technical deliverables involved collaboration with scholars from Harvard University, London School of Economics, University of Oxford, and law firms advising on Double Irish and Dutch Sandwich structures.

Implementation and multilateral instruments

Implementation has proceeded through national legislation, bilateral tax treaties, and the Convention on Mutual Administrative Assistance in Tax Matters framework. The Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting, commonly called the Multilateral Instrument, modifies thousands of bilateral treaties among parties including Australia, Canada, Japan, and Mexico. Coordination mechanisms include the Inclusive Framework on BEPS, OECD/G20 steering groups, and peer review processes involving the European Court of Justice in disputes. Implementation intersects with initiatives such as the Common Reporting Standard, bilateral Mutual Agreement Procedures under the Organisation for Economic Co-operation and Development Model, and proposals advanced at the United Nations General Assembly tax committee.

Impact and evaluations

Empirical assessments by institutions like the International Monetary Fund, World Bank, and European Commission estimate changes in declared profits and tax revenues, with case studies involving Amazon (company), Microsoft, and Fiat Chrysler Automobiles. Peer reviews and academic evaluations from Massachusetts Institute of Technology and University of Cambridge examine effects on profit allocation, effective tax rates, and investment flows. Evidence shows increased transparency through country-by-country reporting filings, changes in treaty shopping practices, and repatriation trends in jurisdictions like Ireland, Switzerland, and Singapore. Economic modelling by Organisation for Economic Co-operation and Development and International Monetary Fund highlights distributional impacts among advanced economies and emerging markets such as India and Brazil.

Criticisms and controversies

Critics include scholars from Columbia University, NGOs like the Tax Justice Network, and politicians in European Parliament who argue the Project inadequately addresses allocation of taxing rights to market jurisdictions or fails to tackle low-tax financial centres including Isle of Man and Jersey. Controversies involve perceived lobbying by multinational consultancies (PwC, Deloitte), disputes over the scope of the Multilateral Instrument, and tensions between United States tax reform and BEPS measures. Debates continue in forums such as the G20 Summit, United Nations Committee of Experts on International Cooperation in Tax Matters, and national parliaments in France and Germany over proposals like a global minimum tax and digital services taxation promoted by European Commission and opposed by some Organisation for Economic Co-operation and Development members.

Timeline and major milestones

Key milestones include the 2013 BEPS Action Plan endorsement at the Saint Petersburg G20 Summit; release of final reports in 2015; adoption of the Multilateral Instrument in 2016; establishment of the Inclusive Framework on BEPS in 2016; implementation of country-by-country reporting standards endorsed by the OECD in 2015; and the 2021 agreement on a two-pillar solution on taxation of the digitalized economy brokered by the OECD and supported by G20 finance ministers. Subsequent developments involve ratification processes in national legislatures such as the United States Congress and treaty networks among European Union member states, ongoing peer reviews, and negotiations at the IMF and World Bank governance forums.

Category:Tax avoidance Category:International taxation