End of corporate tax avoidance: Governments coming to the final stage of ratifying the BEPS project

The much anticipated biggest rules in international taxation- the OECD designed and G20 promoted BEPS (Base Erosion and Profit Shifting) Project is coming into the final stages. World’s leading finance ministers at the leadership of the G20 agreed on Friday to create international and domestic laws for taxing profits; giving warning to MNCs that they should end tax avoidance practices.

BEPS project is a set of international tax rules proposed to counter the widespread tax avoidance practices by big MNCs. The companies use tax loop holes, concessions and Double Taxation Avoidance Treaties (DTATs) to escape from taxation. This has frustrated governments and more than that, citizen groups and social activists in many developed countries are accusing that governments are having blind eye on corporate tax avoidance.

The new rules on BEPS are designed to improve transparency, close loopholes and restrict the use of tax havens.

As part of the effort, sixty Finance Ministers have agreed to the set of rules proposed by the OECD study group to check the widespread corporate tax avoidance.

OECD is the rich nation’s club that formulates new international laws and put in front of powerful bodies like the G20 for global implementation.

Angel Gurría, head of the OECD, said that it was time “to recover the trust of our citizens” and “move to the next phase which consists of a well-defined trilogy: implementation, implementation, implementation”. Success of the BEPS depends upon its global implementation.

Social groups criticized that new rules are not enough and are merely patching up the existing system. They accused that governments fear the mighty corporate.

Many policy makers have raised the concern that governments are afraid that the corporate may cut down investment activities once tax incentives and avoidance loopholes are provided.