Profit shifting is the whole idea of MNCs reporting profit to places with relatively less or no tax, a practice that, according to The Organisation for Economic Co-operation and Development (OECD), costs governments US$100-US$240 billion in lost tax revenue every year. So the IMF has struck a pact with 141 countries to put in a base tax rate of 15%, something that the IMF says will lead to companies paying collectively an extra 14% more in corporate income tax. But while this is all good and well, every member country actually has to enforce this pact for it to work.
“Business operates internationally, so governments must act together to tackle BEPS and restore trust in domestic and international tax systems. BEPS practices cost countries 100-240 billion USD in lost revenue annually, which is the equivalent to 4-10% of the global corporate income tax revenue. Working together in the OECD/G20 Inclusive Framework on BEPS, 141 countries and jurisdictions are implementing 15 Actions to tackle tax avoidance, improve the coherence of international tax rules, ensure a more transparent tax environment and address the tax challenges arising from the digitalisation of the economy,” said the OECD.
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