FM Jaitley signs multilateral convention in Paris

In yet another move to check tax evasion, India and 67 countries have put in place an agreement to plug loopholes in existing laws that allowed companies to evade taxes by artificially shifting their place of business.

Finance Minister Arun Jaitley signed the multilateral convention to tackle base erosion and profit shifting. BEPS is resorted to by MNCs through tax planning strategies by exploiting gaps and mismatches in tax rules.

India has put in motion a comprehensive plan aimed at curbing Tax evasion by the Multinational Corporations. India has signed the Organisation for Economic Co-operation and Development or the OECD multilateral convention that aims to check cross-border tax evasion by multinational companies.

Union Finance Minister Arun Jaitley signed the multilateral convention in Paris to implement tax treaty- related measures to prevent base erosion and profit shifting. It will curb revenue loss through treaty abuse and base erosion and ensure that profits are taxed where substantive economic activities generating the profits are carried out and where value is created.

The Multilateral Convention is an outcome of the OECD, G20 Project to tackle Base Erosion and Profit Shifting. In 2015, Prime Minister Narendra Modi picked up the issue in G20 and OECD meetings, after which the process was accelerated. Union Cabinet has also given a green signal to the agreement last month.

The MNCs often resort to such tactics through tax planning strategies by exploiting gaps and mismatches in tax rules. It helps them artificially shift profits to low or no-tax locations, resulting in little or no overall corporate tax being paid, that results in potential loss of tax revenue for the nations where the economic activity creating value generations takes place.

India was part of the Ad Hoc Group of more than 100 countries and jurisdictions from G20, OECD, BEPS associates which worked on an equal footing on the finalisation of the text of the Multilateral Convention.

The new arrangement will now curb this activity by the MNCs. More than 65 countries, including India, signed the convention. More countries are expected to sign the convention in coming days. This is one more step that the Modi government has initiated to stop loss of revenue due to unfair means and ensure that the money meant for welfare in India is accounted for.