The Organization for Economic Cooperation and Development (OECD) released a report on August 1 on the impact of base erosion and profit shifting (BEPS) on low income countries. At the G20’s request, the OECD has created an action plan of 15 actions that can be taken to combat BEPS, which allows certain multinational enterprises (MNEs) to shift profits to low-tax jurisdictions or to create “stateless income” that is not taxed in any jurisdiction. This report, the first of two concerning developing countries, identifies particular BEPS issues that are most relevant in developing countries. The report focuses on the difficulties that developing countries have in adopting legislation, gathering information ,and developing the administrative capacity necessary to combat BEPS. The report concludes that these difficulties leave the door open to simpler, but potentially more aggressive, tax avoidance than is typically encountered in developed economies. Part 2 of the series will address the steps that the G20 can take to help developing countries overcome these challenges.
The report can be accessed here.