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 Base Erosion and Profit Shifting (BEPS) is when big companies use smart tricks to shift their profits from high-tax countries to low or no-tax countries. This makes it look like the company is earning money in countries where they pay less tax, instead of where they actually do business. As a result, countries lose tax revenue.

Simple Example:

Imagine a large company called XYZ Corp. that sells products in the U.S. but also has a small office in a country with low taxes, like Ireland. XYZ Corp. could "sell" its product rights (like a patent) to the Irish office, which then "sells" the products back to the U.S. office for a fee. This way, most of the profit ends up in Ireland, which has lower taxes, and the U.S. gets less of the money, even though the products are being sold in the U.S.

Why BEPS is a Problem:

When companies do this, countries lose out on tax money that they could use for schools, hospitals, or infrastructure. This is unfair to the countries that are losing tax revenue, especially poorer countries that rely more on taxes from businesses.

What is Being Done:

The OECD (a group of countries) is working to fix this problem by creating rules that stop companies from shifting profits to avoid paying taxes. These rules make it harder for companies to use tricks to avoid taxes and ensure they pay taxes where they actually do business.

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