Profit shifting and BEPS: the scale of it, in numbers that hold up

"Profit shifting" is the plain term. "BEPS," for base erosion and profit shifting, is what the tax world calls it. Both describe the same thing: using gaps and mismatches between countries' tax rules to move profit to where little or no real business actually happens. This page is about the size of it, using only figures that survive scrutiny.

Most profit shifting is not illegal. Some is (sham transactions, false paperwork), but the bulk is aggressive use of an international system built for a world of physical goods, not for a world where a tech company's crown jewel is software owned by a letterbox company. The OECD launched its BEPS project in 2013 and published a 15-point action plan in 2015, now overseen by a group of more than 140 countries.

The headline numbers, with their caveats attached

There is no single agreed figure, because the thing being measured is, by design, hidden. There are several serious estimates, and the honest move is to show them side by side and date each one.

• The OECD's official range: governments lose USD 100 to 240 billion a year to profit shifting, which is 4 to 10% of all corporate tax collected worldwide. This is explicitly a policy range from economic modelling, measured at 2014 levels, not a precise count. The OECD has not replaced it with a higher headline, so it is still the number it cites.
• The most-cited academic estimate (Tørsløv, Wier and Zucman): close to 40% of multinationals' foreign profits, around USD 616 billion, were shifted to tax havens in 2015. On the authors' updated figures that sum had grown to close to USD 1 trillion by 2019, with the share still close to 40% of profit. The published peer-reviewed version puts the 2015 share slightly lower, at about 36%; the figures differ by base year and version, and we label which is which.
• The Tax Justice Network (State of Tax Justice 2024, using 2021 data): governments lose about USD 347.6 billion a year specifically to corporate profit shifting, part of a wider USD 492 billion lost to all cross-border tax abuse. The network estimates USD 1.42 trillion of profit is shifted a year.

The same researchers found that, without profit shifting, profits would rise by roughly 15% in high-tax EU countries and 10% in the United States, while profits in the tax havens would fall by around 60%. US multinationals account for roughly half of all the shifting.

What it costs the six countries this site covers

These are the direct annual corporate tax losses each country suffers from profit shifting, confirmed to the decimal against the Tax Justice Network's 2024 dataset (2021 data):

• United States: USD 32.6 billion a year, the largest absolute loser.
• Australia: USD 22.1 billion a year, about 1.4% of GDP, the highest share among the five.
• India: USD 21.4 billion a year, about 0.7% of GDP.
• United Kingdom: USD 16.9 billion a year, about 0.5% of GDP.
• Canada: USD 8.9 billion a year, about 0.4% of GDP.

Two of these countries are also among the world's biggest exporters of the problem. The same dataset shows the UK inflicting USD 23.5 billion of losses on other countries through its own structures and territories, and Canada inflicting USD 31.2 billion. The UK and its network of overseas territories together account for about 26% of all countries' corporate tax losses, costing the world around USD 129 billion a year. A country can be a victim and a venue at the same time.

These are direct losses. IMF researchers have estimated that the indirect cost, from countries cutting their own tax rates to compete, may run several times larger.

Did the reforms work?

Partly. The OECD's global minimum tax (a 15% floor, in effect from 2024) is estimated to cut the share of multinational profit taxed below 15% from about 36% down to around 7%, roughly halving profit shifting and raising USD 155 to 192 billion a year in corporate tax. That is a real change.

But the Tax Justice Network's analysis of 2016 to 2021 data found "remarkably little impact" on the actual volume of profit shifting across the years the reforms were rolling out. The blunt reading: multinationals adapted faster than legislatures could rewrite the rules. The reforms close specific doors. New doors keep appearing.