India sees consensuses by Oct. on OECD-G20 global tax deal

Subject: International Relations

Context: Recently, India has announced its joining under OECD/G20 Inclusive Framework on Base Erosion and Profit Shifting (BEPS).

Concept:

OECD/G20 Inclusive Framework on Base Erosion and Profit Shifting (BEPS)

It is a tax deal which consists of two components:
Pillar One which is about reallocation of additional share of profit to the market jurisdictions; and
Pillar Two consisting of minimum tax and subject to tax rules
The framework brings together over 135 countries and jurisdictions to collaborate on the implementation of the BEPS Package.
The BEPS package provides 15 Actions that equip governments with the domestic and international instruments needed to tackle tax avoidance.

Significance of OECD/G20 Inclusive Framework on BEPS

It allows interested countries and jurisdictions to work with OECD and G20 members on developing standards on BEPS related issues and review and monitor the implementation of the BEPS Package.
It will actively monitor the implementation of all the BEPS Actions and reports annually to the G20 on this progress.
All countries and jurisdictions joining the framework will participate in the review process, which allows members to review their own tax systems and to identify and remove elements that pose BEPS risks.

Base Erosion & Profit Shifting (BEPS)

In September 2013, the G20 Leaders endorsed the ambitious and comprehensive BEPS Action Plan, developed with OECD members.
It refers to tax planning strategies used by multinational enterprises that exploit gaps and mismatches in tax rules to avoid paying tax.
It is of major significance for developing countries due to their heavy reliance on corporate income tax, particularly from multinational enterprises.