Base erosion and profit shifting

Base erosion and profit shifting (BEPS) refers to corporate tax planning strategies used by multinationals to "shift" profits from higher-tax jurisdictions to lower-tax jurisdictions, thus "eroding" the "tax-base" of the higher-tax jurisdictions.[5][6] The Organisation for Economic Co-operation and Development (OECD) define BEPS strategies as "exploiting gaps and mismatches in tax rules".[6]

The United States Department of the Treasury decided against signing the 2016 OECD anti–BEPS MLI initiative from the § Failure of OECD (2012–2016), stating that the U.S.: "has a low degree of exposure to base erosion and profit shifting".[1] International tax academics showed in 2018 that U.S. multinationals are the largest users of BEPS tools in the world;[2] while U.S tax academics demonstrated, even as early as 1994 that the U.S. Treasury is a net beneficiary from the use of tax havens and BEPS by U.S. multinationals.[3][4]

Corporate tax havens offer BEPS tools to "shift" profits to the haven, and additional BEPS tools to avoid paying taxes within the haven (e.g. Ireland's "CAIA tool").[lower-alpha 1] It is alleged that BEPS tools are associated mostly with American technology and life science multinationals.[lower-alpha 2][2] A few studies showed that use of the BEPS tools by American multinationals maximised long–term American Treasury revenue and shareholder return, at the expense of other countries.[3][4][2]