Trade Talks

To understand ‘BEPS 2.0’ first we need to understand what BEPS is. BEPS (Base Erosion and Profit Shifting) is a tax planning strategy that is used by MNCs to shift their profits from high-tax jurisdiction to low-tax or no-tax jurisdiction. Basically, companies erode the tax base through deductible payments such as interest and royalties, which is undoubtedly an unfair practice to local tax authorities. To limit these practices OECD identified 15 action plans in 2015. But a number of problems remain outstanding, particularly regarding digitalization and the digital economy. Hence, on 29th January 2019, OECD came up with new proposals to combat BEPS activities. Which are generally called ‘BEPS 2.0’. This new policy fills the gaps and answers the questions which remained unanswered in ‘BEPS 1.0’. As of now, there are Pillar One and Pillar Two proposals announced under ‘BEPS 2.0’. Pillar One focuses on coherent review in profit allocation, whereas Pillar Two focuses on exercising of prim