BEPS Primer: Past, Present, And Future, Part 2

Taxnotes International, Volume 99, Number 2, July 13, 2020

18 Pages Posted: 30 Sep 2020

See all articles by Jeffery M. Kadet

Jeffery M. Kadet

University of Washington - School of Law

Date Written: 2020

Abstract

This is a mid-2020 Update of my 2016 BEPS Primer article. This 2020 Update is in two parts. Part 1 focused on the initial two-year BEPS project and developments concerning it since the release of the October 5, 2015 Final Reports. This Part 2 focuses on Pillars One and Two of the currently ongoing BEPS 2.0 OECD-led process.

Governments throughout the world have been losing many billions of dollars of tax revenues over the past two decades from tax avoidance conducted by many multinational groups (MNEs). These MNEs have aggressively structured their operations and transactions in manners that often lack economic reality so as to divorce their profits from the activities that earn those profits, thereby recording excessive profits in group members that are subjected to zero or low-taxation. The success of this tax avoidance motivated the G-20 and the OECD to begin the initial two-year Base Erosion and Profit Shifting (BEPS) OECD-led project, which took place from 2013 to 2015.

Following the initial two-year project were several years of continued developments with an acceleration of activity beginning in 2019, which has been termed BEPS 2.0. This BEPS 2.0 project is described in this Part 2 in some detail with editorial thoughts on its potential effects and how it may proceed. BEPS 2.0 includes two “Pillars”, the first of which would provide for limited taxation by market countries and the second of which would create a minimum tax to discourage profit shifting.

This discussion of the BEPS project is intended to give the reader an understanding of the project’s origin, its objectives, and how it may proceed in the future. It does not provide details of the specific results of the work on the initial project’s 15 Action Plan items. Rather, only some brief comments are made on them to give the reader a flavor of the BEPS work undertaken by the OECD and the others who participated in this project. It is more detailed regarding the currently on-going BEPS 2.0 Pillars One and Two.

More specifically, the Primer includes:

— Examples of MNE BEPS activities,

— Description of how the environment strongly motivates BEPS behavior including both systemic issues and developments occurring over past decades,

— Participants in the BEPS process,

— Brief comments on the initial BEPS Project 15 Action Plan Items,

— Results of the initial BEPS Project and possible future developments, and

— Description, comments, and editorial reflections on both Pillars One and Two of BEPS 2.0.

Keywords: BEPS, Base Erosion, Profit Shifting, International Taxation, MNE, MNC, OECD, G20, BEPS 2.0, Pillar One, Pillar 1, Pillar Two, Pillar 2

JEL Classification: H21, H25, K34, E62

Suggested Citation

Kadet, Jeffery M., BEPS Primer: Past, Present, And Future, Part 2 (2020). Taxnotes International, Volume 99, Number 2, July 13, 2020, Available at SSRN: https://ssrn.com/abstract=3674040

Jeffery M. Kadet (Contact Author)

University of Washington - School of Law ( email )

William H. Gates Hall
Box 353020
Seattle, WA 98105-3020
United States

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