The Role of International Cooperation in Combating Tax Avoidance in Nigeria: A Case Study of the OECD BEPS Framework

The Role of International Cooperation in Combating Tax Avoidance in Nigeria: A Case Study of the OECD BEPS Framework

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Background of the Study

Tax avoidance, where companies exploit legal loopholes to reduce their tax liabilities, remains a significant challenge globally, particularly in developing countries like Nigeria. The Organization for Economic Cooperation and Development (OECD) introduced the Base Erosion and Profit Shifting (BEPS) framework in 2015 to combat tax avoidance and promote fairness in international tax systems. The BEPS framework provides guidelines for addressing tax practices that shift profits to low-tax jurisdictions, thereby reducing the tax base of higher-tax countries.

Nigeria, as a member of the OECD’s Global Forum on Transparency and Exchange of Information for Tax Purposes, has committed to adhering to international tax standards and implementing reforms that align with the BEPS framework. While the Nigerian government has taken steps to adopt some of the BEPS recommendations, challenges remain in fully integrating these practices into the national tax system. Issues such as weak enforcement mechanisms, lack of capacity within tax authorities, and the involvement of multinational companies in complex cross-border transactions complicate efforts to tackle tax avoidance.

This study investigates the role of international cooperation, particularly the OECD BEPS framework, in assisting Nigeria to combat tax avoidance, focusing on the extent to which international tax agreements and collaborative efforts have impacted Nigerian tax policy and practices.

Statement of the Problem

Although Nigeria has made strides in aligning its tax policies with international standards, tax avoidance remains prevalent due to weaknesses in the implementation of the OECD BEPS framework and challenges related to international cooperation. The Nigerian tax authorities face difficulties in combating tax avoidance, especially in light of the increasingly sophisticated strategies employed by multinational companies. This study seeks to explore the role of international cooperation in combating tax avoidance in Nigeria and assess the effectiveness of the OECD BEPS framework in addressing these challenges.

Objectives of the Study

1. To evaluate the impact of the OECD BEPS framework on Nigeria’s efforts to combat tax avoidance.
2. To assess the role of international cooperation in improving Nigeria’s tax policies and enforcement mechanisms.
3. To identify the challenges faced by Nigeria in implementing the OECD BEPS recommendations.

Research Questions

1. How has the OECD BEPS framework impacted Nigeria’s efforts to combat tax avoidance?
2. What role does international cooperation play in enhancing Nigeria’s tax policies and enforcement mechanisms?
3. What challenges does Nigeria face in implementing the OECD BEPS recommendations?

Research Hypotheses

1. H0: The OECD BEPS framework has not significantly impacted Nigeria’s efforts to combat tax avoidance.
2. H0: International cooperation has not played a significant role in improving Nigeria’s tax policies.
3. H0: Nigeria faces significant challenges in implementing the OECD BEPS recommendations.

Scope and Limitations of the Study

The study will focus on Nigeria’s engagement with the OECD BEPS framework and assess its role in combating tax avoidance from 2015 to 2025. The study will also examine challenges in implementing BEPS recommendations and the role of international cooperation. Limitations include potential challenges in accessing detailed information on cross-border tax transactions and the varying levels of implementation of BEPS recommendations.

Definitions of Terms

• Base Erosion and Profit Shifting (BEPS): A set of international guidelines developed by the OECD to address tax avoidance strategies that exploit gaps in tax laws.
• Tax Avoidance: The legal use of tax laws to minimize tax liabilities through strategies that are not aligned with the intent of the law.
• International Cooperation: Collaborative efforts between countries and international organizations to address global tax issues, such as tax avoidance and evasion.
• OECD: The Organization for Economic Cooperation and Development, an international organization that promotes policies for global economic development, including tax cooperation

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