Base erosion and profit shifting (BEPS) refers to tax planning strategies used by multinational enterprises that exploit gaps and mismatches in tax rules to avoid paying tax. Developing countries’ higher reliance on corporate income tax means they suffer from BEPS disproportionately. BEPS practices cost countries USD 100-240 billion in lost revenue annually.
Inclusive Framework On BEPS
Working together within OECD/G20 Inclusive Framework on BEPS, over 135 countries and jurisdictions are collaborating on the implementation of 15 measures to tackle tax avoidance, improve the coherence of international tax rules and ensure a more transparent tax environment.
MLI allows its signatories to implement the tax treaty measures developed through the BEPS project in existing bilateral tax treaties in a synchronized and efficient manner.
What it is all About
The measures introduced by the MLI are meant to prevent treaty abuse, improve dispute resolution, prevent the artificial avoidance of permanent establishment statues, and neutralize the affect of hybrid mismatch arrangements.
Entry Into Force
The MLI modifications to covered tax treaties shall enter into force three months after the deposit of ratification instruments with the secretariat of the OECD, depending on the position of the other treaty party.