Base Erosion

Base erosion occurs when large multinational corporations shift their profits from high-tax countries to low-tax or no-tax jurisdictions through strategies like transferring prices or moving intellectual property. This reduces the taxable income in the countries where they operate, lowering government revenue needed for public services. Essentially, it erodes the tax base of countries, making it more difficult for governments to fund infrastructure, healthcare, and education. Addressing base erosion involves international cooperation to ensure companies pay their fair share of taxes where economic activities take place.