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Introduction: Organization For Economic Co-Operation And Development Inclusive Framework On The Base Erosion And Profit Shifting Project


In 2018, 79 countries lost $125B in corporate tax revenue through profit shifting and base erosion. The greatest monetary losses were experienced by India, Russia and the U.S. at $24B, $16B and $32B. These are major loss amounts, but when the least-well-off countries lose even a fraction of this revenue, it has a marginal cost impact much greater than than the losses born by countries who are economic powerhouses. It is incumbent on all of us to level the playing field to make things fairer for developing nations to increase their rate of access to opportunity, to be at least commensurate with the level of increase experienced by other nations, but for their losses.

There is no doubt that enhanced systems of tax avoidance coupled with economic digitalization have changed the international tax ecosystem. For now, it’s an environment where transfer pricing opportunities are ubiquitous and extremely lucrative. In response, the OECD & G20 have been working diligently to tighten the reins on transfer pricing through the Inclusive Framework Base Erosion and Profit Shifting Project. Recently, a deadline has been for the Inclusive Framework to produce a workable plan available for implementation by January of 2021. None of this is without challenge because at its core, taxation is a state-based enterprise.

Taxation is founded in principles of sovereignty. When seeking agreement between states, the benefits and harms must be well balanced. Too much risk to a state’s domestic corporations or not enough flexibility may cause the state not to pledge at all. It may also cause a previously pledged country to change their position, or worse, to exit the IF-BEPS process without or even with prejudice because the agreement in total was just too burdensome on her interests. I’ll post a question on this issue soon, but for now, I’d like to get to the purpose of this blog-post: the Timeline.

As an introduction, I’ve broken-down the progress of the IF-BEPS Project in the form of a timeline, so that the average reader can track its course. I’ll be fielding questions to the TaxConnections audience on the issue over the next couple of weeks, as I’m certain many of you have deep knowledge in this subject matter area and can help us all think more broadly and deeply about what’s happening on the international stage.


In 2013, the OECD/G20 formed the Inclusive Framework (IF) on Base Erosion & Profit Shifting Project (BEPS). The project emerged in the wake of the subprime mortgage crisis, banking corruption and massive offshore financial center abuse issues.

In 2015, the BEPS produced the Action 1 Report. This report identified the tax challenges of the digitalization of the economy as one of the main areas of focus of the OECD/G20 IF-BEPS. The Action 1 Report found that the whole economy was digitizing and, as a result, it would be difficult, if not impossible, to ring-fence the digital economy. For indirect taxes, the Action 1 Report recognized new challenges related to the collection of Value Added Taxes (VAT)/Goods and Services Taxes (GST) on the continuously growing volumes of goods and services that consumers purchase online from foreign suppliers. For direct taxes, the Action 1 Report observed that while digitalization could exacerbate BEPS issues, it also raises a series of broader tax challenges, which it identified as “nexus, data and characterization”.

On January 23rd, 2019 a Policy Note was approved and released by the IF-BEPS which “lay the grounds for the Inclusive Framework to come to an agreement on the way forward.” An agreement to examine proposals involving two-pillars which could form the basis for consensus would be examined. The pillars address new rules on nexus and profit allocation (Pillar 1); and, new rules on something like a global minimum tax (Pillar 2).

On May 28th, 2019, a Programme of Work (PoW) was adopted by the IF-BEPS. The PoW provides for two pillars to be developed, on a without prejudice basis, with agreement by the end of 2020. The PoW allocates work to explore three proposals: A highly digitalized business models approach, the marketing intangibles approach and the significant economic presence approach (issues with scope, primarily). These three approaches were to be unified collectively as Pillar 1. By June of 2019, this was approved by the G20 Finance Ministers, which meant that the Secretariat still needed to unify the documents.

On October 1st, the Secretariat developed and released the Unified Approach, which blended the above three approaches collectively. Significant commonalities were identified in the PoW. As a result, a Unified Approach under Pillar 1 Proposal (UAP) was developed, discussed by the Task Force on the Digital Economy (TFDE) at its October meeting and was released to the public for comment review period beginning October 9th and lasting through November 12th of 2019 .

On November 21-22nd, 2019, the IF held a public comment session in Paris regarding the UAP. Over 450 colleagues from members of the Inclusive Framework, various countries, Multi-National Entities (MNE’s), regional tax organizations, international tax organizations and academia registered for the public comment discussion. Over 3000 pages of comments were received from either 304 or 305 different interested parties.

On January 29th, 2020, the IF-BEPS member countries affirmed their commitment to reach an agreement by the end of 2020, agreed upon an outline of the architecture of a Unified Approach on Pillar One as the basis for negotiations and welcomed progress made on Pillar Two. The affirmation was made by the delegates, not politicians, to continue the Project. As discussed above, Pillar 1 revolves around new Nexus (jurisdiction) and apportionment rules, while Pillar 2 revolves around a global minimum tax.

Finally, on February 6th, 2020, the IF-BEPS established a three-tiered standardised approach to transfer pricing documentation, including a Country-by-Country Report (CbC report) that provides details of an MNE group’s revenues, profit before tax, tax accrued and other information relevant to a high level risk assessment, for each tax jurisdiction in which the MNE group has a constituent entity. The IF welcomes comments on all aspects of the BEPS Action 13 report, but specifically invites comments on the questions raised throughout the public consultation document. Interested parties are invited to send their comments no later than Friday, 6 March 2020, 18:00 (CET), by e-mail to in Word format.

Have a question? Contact Tax Consultant Gary Heald Jr.

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Gary Heald Jr