How Will BEPS Affect The 2014 Budget?

Last year, the Organisation for Economic Co-operation and Development ("OECD"), a highly influential global body that directs economic policy among the world's wealthiest nations, announced an initiative to combat so-called co-called Base Erosion and Profit Shifting ("BEPS").

BEPS refers to tax planning strategies, primarily by multinational enterprises ("MNEs"), that supposedly exploit loopholes in tax rules so as to shift profits to jurisdictions where there is allegedly little real activity but taxes are low, resulting in low overall corporate taxes being paid. Although such strategies are not generally illegal, the OECD claims that BEPS distorts competition – giving MNEs an advantage over local operations. It is also claimed that it results in economic inefficiency as investment decisions are made for tax (as opposed to commercial) reasons, and that it undermines voluntary compliance, as "ordinary" taxpayers will see this advantage given to MNEs as being unfair.