The Union cabinet on Wednesday approved signing of a multilateral convention to implement measures to prevent shifting of profits by companies to low-tax nations to avoid paying taxes here. The approval came at a meeting of the Cabinet chaired by Prime Minister Narendra Modi, Power Minister Piyush Goyal said, asserting that the multilateral convention will plug loopholes in existing laws under which companies show artificial shifting of profit to countries where tax is low. “The Union Cabinet chaired by Prime Minister Narendra Modi on Wednesday gave its approval for the Multilateral Convention to implement tax treaty-related measures to prevent base erosion and profit shifting,” the Finance Ministry said here in a statement. “The multilateral convention will plug loopholes of base erosion and profit sharing. People try to artificially show shifting of profit to countries where tax is low, economic activity is low. This loophole will be plugged now,” Union Power Minister Piyush Goyal told reporters, briefing them about the cabinet decisions.The convention is an outcome of the Organisation for Economic Cooperation and Development (OECD)/G20 Base Erosion and Profit Shifting (BEPS) project. The convention will tackle base erosion and profit shifting through tax planning strategies that exploit gaps and mismatches in tax rules to artificially shift profits to low or no-tax locations where there is little or no economic activity, resulting in little or no overall corporate tax being paid, the statement said.
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