Cabinet approves ratification of OECD's multilateral convention to check tax evasion

The Cabinet Wednesday approved ratification of a multilateral convention to implement OECD's project on checking tax evasion.

The Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting (BEPS) was signed by the then Finance Minister Arun Jaitley in Paris on June 7, 2017.

The Union Cabinet, headed by Prime Minister Narendra Modi, Wednesday approved the ratification of the convention.

"The Convention will modify India's treaties in order to curb revenue loss through treaty abuse and base erosion and profit shifting strategies by ensuring that profits are taxed where substantive economic activities generating the profits are carried out and where value is created," an official release said.

The Multilateral Convention is an outcome of the OECD/G20 Project to tackle Base Erosion and Profit Shifting (BEPS), which is resorted to by MNCs 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.

Post this convention, 90 countries have now implemented the automatic exchange of financial account and tax information.

The Convention enables all signatories to meet treaty-related minimum standards that were agreed as part of the BEPS package.