Multi-Lateral Instrument: A BEPS Initiative – Aims In Bringing Synchronization & Harmonization

INTRODUCTION

The interaction of domestic tax systems of different countries and the bilateral tax treaties amongst them, sometimes have led to unintended overlaps and gaps. Overlap happens when income is sought to be taxed by more than one jurisdiction resulting in double taxation, while gaps are manifested when income ends up not being taxed by any jurisdiction resulting in double non-taxation.

It is widely felt that bilateral tax treaties amongst different countries were applied to build complex structures, thereby artificially shifting profits to low tax or no tax jurisdictions, sans any economic/ commercial rationale or basis, to address such artificial shifting of profit to low or no tax jurisdiction. In 2013 the Organization for Economic Cooperation and Development (OECD) along with the G20 countries and the developing nations unveiled a package of 15 Actions items under the Base Erosion and Profit Shifting Project (BEPS). The BEPS project is premised upon