A package of measures to tackle corporate tax evasion that will have a far-reaching impact on companies' taxation strategies was endorsed by G20 leaders on Monday. [Special coverage]
Multinationals have long exploited loopholes in rules to avoid corporate taxation.
The new measures are an internationally coordinated effort to align this form of taxation with value creation and economic activity. They are based on the technical term base erosion and profit shifting, known as BEPS.
For example, a legally valid tactic known as "transfer pricing" has been used to shift multinational companies' profits from where firms are based to low-tax havens to avoid paying tax.
The resulting revenue losses to national treasuries have risen from $100 billion to $240 billion a year, according to the most conservative estimate by the Organization for Economic Cooperation and Development.
Before the G20 summit, the full text of the 15-point BEPS recommendation was released by the OECD on Oct 5 and subsequently endorsed by G20 finance ministers.
China has been one of the most active participants in deliberations on the initiative. Since the start of 2013, the country has submitted more than 1,000 suggestions to international panels drafting the plan.
