UPSC General Studies Solved Paper - General Studies-2016

  • question_answer
    The term 'Base Erosion and Profit Shifting' is sometimes seen in the news in the context of

    A)  mining operation by multinational companies in resource-rich but backward areas.

    B)  curbing of the tax evasion by multinational companies.

    C)  exploitation of genetic resources of a .country by multinational companies.

    D)  lack of consideration of environmental costs in the planning and implementation of developmental projects.

    Correct Answer: B

    Solution :

    Exp. [b] Base, Erosion and Profit Shifting (BEPS) is of major significance developing countries due to their heavy reliance on corporate income tax, particularly from multinational enterprises. Engaging developing countries in the international tax agenda is important to ensure that they receive support to address their specific needs. Inclusive framework brings together over 100 countries and jurisdictions to collaborate on the implementation of the OECD/ 120 BEPS Package. BEPS refers to tax planning strategies that exploit gaps and mismatches in tax rules to artificially shift profits to low or no-tax locations where there is little or no economic activity. Although some of the schemes used are illegal, most are not. This undermines the fairness and integrity of tax systems because businesses that operate across borders can use BEPS to gain a competitive advantage over enterprises that operate at a domestic level. Moreover, when taxpayers see multinational corporations legally avoiding income tax, it undermines voluntary compliance by all taxpayers.

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