Base Erosion and Profit Shifting UPSC - Target IAS Kannada

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 los…