The term 'Base Erosion and Profit Shifting' is sometimes seen in the news in the context of
- Amining operation by multinational companies in resource-rich but backward areas
- Bcurbing of the tax evasion by multinational companiesCorrect
- Cexploitation of genetic resources of a country by multinational companies
- Dlack of consideration of environmental costs in the planning and implementation of developmental projects
Explanation
The term 'Base Erosion and Profit Shifting' (BEPS) refers to tax planning strategies used by multinational enterprises (MNEs) that exploit gaps and mismatches in tax rules to avoid paying tax. These strategies effectively 'erode' the tax base and 'shift' profits to low-tax or no-tax jurisdictions where there is little or no economic activity, resulting in little or no overall corporate tax being paid. The OECD and G20 launched an initiative to address BEPS, aiming to create a single set of international tax rules to close loopholes and prevent tax avoidance by MNEs. Thus, the term is directly related to curbing tax evasion by multinational companies.
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