Lesson 50 - Advanced Accounting Course

Lesson 50: Base Erosion and Profit Shifting (BEPS) in Corporate Taxation

💡 What Is BEPS?

BEPS stands for Base Erosion and Profit Shifting.

It refers to legal strategies used by multinational corporations (MNCs) to:

• 📉 Erode the taxable base in high-tax countries (pay less tax there)
  
  

• 🔁 Shift profits to low- or no-tax jurisdictions (like tax havens)
  
  

🧾 Companies often do this without moving actual economic activity, just moving numbers on paper.

🧠 Why Does BEPS Matter?

📉 Countries lose tax revenue
🏛️ Governments can’t fund schools, hospitals, etc.
🧾 Creates unfair advantages for large firms over small ones
🌍 Distorts global tax fairness

🧨 The OECD estimates $100–$240 billion USD in tax revenue is lost annually due to BEPS.

🧩 Common BEPS Strategies

🌍 Global Response: The OECD BEPS Project

The OECD (Organisation for Economic Co-operation and Development) launched the BEPS Action Plan to stop tax avoidance by MNCs.

🔟 BEPS Key Action Items

🧾 Example of BEPS in Action

📍Apple used Irish subsidiaries to pay very low taxes on global earnings.

• Most of Apple’s profits were reported in Ireland 🇮🇪
  
  

• Effective tax rate = less than 1%
  
  

• The EU ruled that Ireland gave illegal tax benefits to Apple
  
  

• Apple was ordered to pay €13 billion in back taxes

🧮 Accounting and Reporting Implications

⚖️ Ethical Considerations 

📘 Summary