Base Erosion and Profit Shifting

Base erosion and profit shifting refers to tax planning techniques by companies that exploit gaps in international and domestic tax laws, as well as mismatches between domestic tax systems, to shift profits. As a result, corporate tax rates are unduly low and do not reflect the realities of the underlying economic transactions.

The global international tax framework reflected in countries’ domestic law and bilateral tax treaties assumes that multinational companies will be taxable either in the country where the income is earned (the source state) or the country where the multinational is headquartered (the residence state) – depending on the nature of the cross-border activity undertaken by the multinational enterprise. However, international tax standards, both in terms of domestic law and bilateral arrangements, have not kept pace with developments in the global economy.

The causes of base erosion and profit shifting are manifold and include, among others, gaps and inadequacies of domestic laws, insufficient controlled foreign company rules, transfer mispricing, tax treaty abuses or problems arising from hybrid mismatch arrangements.

The tax laws and policies of one country, as well as the practices of multinational companies, can adversely affect another country’s ability to mobilize domestic revenue. Whether it is intended or not, base erosion and profit shifting can result in a country losing significant tax revenue and consequently undermine its development.

The Subcommittee on BEPS for Developing Countries is mandated to draw upon its own experience and engage with other relevant bodies, particularly the OECD, with a view to monitoring developments on base erosion and profit shifting issues and communicating on such issues with officials in developing countries directly and through regional and inter-regional organizations.

Call for inputs:

  • Information note


  • English
  • French
  • Spanish
  • Request for further feedback on BEPS issues for developing countries

Comments received from:

  • Bangladesh
  • Brazil
  • Chile
  • China
  • Ghana
  • India
  • Lesotho
  • Malaysia
  • Mexico
  • Singapore
  • Thailand
  • Tonga
  • Zambia
  • Christian Aid and Action Aid
  • Economic Justice Network and Oxfam South Africa


  • Workshop on Tax Base Protection for Developing Countries(4 June 2014)
  • ECOSOC special meeting on “International cooperation in tax matters” (5 June 2014)

Subcommittee documents

  • Updated version – Responses to questionnaire for developing countries from the UN Subcommittee on Base Erosion and Profit Shifting (E/C.18/2014/CRP.12)
  • Responses to questionnaire for developing countries from the UN Subcommittee on Base Erosion and Profit Shifting (E/C.18/2014/CRP.12)