- 'Base Erosion and Profit Shifting' (BEPS) refers to tax planning strategies used by multinational enterprises (MNEs) to exploit gaps and mismatches in tax rules across different countries. - These strategies allow MNEs to 'erode' their tax base in higher-tax jurisdictions and 'shift' profits to lower- tax jurisdictions, often where there is little or no real economic activity, resulting in minimal or no corporate tax being paid. - The OECD (Organisation for Economic Co-operation and Development) initiated the BEPS project to tackle these issues and ensure that profits are taxed where economic activities generating the profits are performed and where value is created. Thus, it is about curbing tax avoidance (which is legal but exploits loopholes) by multinational companies. - Options A, C, and D relate to different issues (mining, genetic resources, environmental costs) unrelated to BEPS.
The term 'Base Erosion and Profit Shifting' is sometimes seen in the news in the context of
Asked in UPSC IAS 2016 · Topic: Fiscal Policy & Revenue (Taxation System in India: Direct, Indirect taxes, and Tax Reforms (including GST))
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Answer: B. curbing of the tax evasion by multinational companies
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