BEPS in India Impact on Indian Tax Policies and Objectives
Purusing MBL from NLSIU, Bengaluru, India
Volume II – Issue II, 2020
The Organization for Economic Co-operation and Development (OECD, Originated as Organization for European Economic Co-operation: OEEC in 1948) was founded in the year 1961 with an intention to encourage economic progress and world trade by way of putting an end to the strategy planning of several multinational companies who have implemented meticulous tax planning methods to shift profits to lower tax jurisdictions, destroying the tax base of the higher tax jurisdictions, by exploiting the gaps in tax rules and avoid paying taxes. This process is termed as Base Erosion and Profit Shifting (BEPS). This is an alarming issue because of the reason that there are several countries that have designed their tax policies in such a way that they look lucrative to foreign investors. Even though on the first instance, they appear to profit the investors, but on the long run are highly dangerous as they impact the economy of countries in a very bad way.
Recently, India has also made several amendments in its domestic laws and treaties to bring them in line with the BEPS recommendations. Further, in a developing country like India, it is also vital to balance the implementation of BEPS recommendations, while continuing to be an attractive investment destination for foreign investors as well. The relevance of BEPS is from an India outbound as well as India inbound perspective. The BEPS project is extremely relevant for India, especially the action plans dealing with treaty abuse and transfer pricing. The main objective of this paper is to critically evaluate the OECD tax model with regard to Base Erosion Profit Shifting in India and its impact on tax policies in India. The BEPS project is extremely relevant for India, especially the action plans dealing with treaty abuse, permanent establishment, and transfer pricing documentation and country-by-country reporting. The relevance of BEPS is from an India outbound as well as India inbound perspective.