The term ‘Base Erosion and Profit Shifting’ is sometimes seen in the news in the context of
[amp_mcq option1=”mining operation by multinational companies in resource-rich but backward areas” option2=”curbing of the tax evasion by multinational companies” option3=”exploitation of genetic resources of a country by multinational companies” option4=”lack of consideration of environmental costs in the planning and implementation of developmental projects” correct=”option2″]
This question was previously asked in
UPSC IAS – 2016
– 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.