Multilateral tax treaty revision to combat tax avoidance: on the merits and limits of BEPS's multilateral instrument.

This article examines the effectiveness of the OECD's Base Erosion and Profit Shifting (BEPS) project, focusing on the multilateral instrument (MLI) designed to swiftly implement anti-tax avoidance changes to double taxation treaties, particularly targeting tax treaty shopping. Despite 141 countries joining the Inclusive Framework (IF) and many adopting the MLI, take-up is incomplete, with conduit countries—those benefiting from treaty shopping—fully participating and covering most treaties, while many others delay or partially implement the provisions. Empirical analyses show that treaty shopping has not significantly declined post-MLI implementation; instead, firms appear to have increased real economic activity in conduit countries to maintain treaty benefits under the new rules. The study concludes that while the BEPS project represents a diplomatic milestone, its anti-treaty shopping measures have yet to eliminate treaty shopping, and incentives remain for firms to exploit non-participating countries, highlighting challenges in designing and enforcing effective multilateral tax agreements.