Base share erosion and profiting (BSEP) is a complex tax avoidance strategy used by multinational corporations that artificially shift profits to low-tax jurisdictions to reduce their overall tax liability, resulting in higher profits for the company and its shareholders.

This is done via:

• Transfer pricing: the setting of inflated prices for goods or services sold between subsidiaries in different countries, funneling profits to the low-tax subsidiary.
• Intangible assets: Attributing a high value to intangible assets like intellectual property and royalties, and licensing them to subsidiaries in low-tax countries to generate tax-deductible expenses in the high-tax country.

Governments in high-tax countries lose out on potential tax revenue due to BSEP strategies. This can have a negative impact on public services and infrastructure. BSEP can create an unfair competitive advantage for multinational corporations compared to smaller, domestic businesses who cannot exploit these loopholes.

Whistleblowing and BSEP:

Employees within multinational corporations, especially those in accounting, tax, or finance departments, might witness instances of BSEP. By reporting these practices to authorities, they can help expose the schemes and hold the corporations accountable.

Whistleblowers can provide crucial information like internal documents, emails, or accounting records that support their claims.

Whistleblower cases can raise public awareness about BSEP practices and put pressure on governments to enact stricter regulations to prevent them.

Addressing BSEP effectively requires international cooperation among governments to close loopholes and harmonize tax regulations.