The term ‘Base Erosion and Profit Shifting’ is sometimes seen in the news in the context of

The correct answer is: Curbing of the tax evasion by multinational companies.

Base Erosion and Profit Shifting (BEPS) is a tax policy term used to describe strategies employed by multinational corporations (MNCs) to shift their profits from high-tax jurisdictions to low-tax or no-tax jurisdictions, thereby eroding the tax base of countries where the actual economic activity takes place. This results in those countries losing significant tax revenue that they are legitimately entitled to collect.

To understand why this is linked to tax evasion/avoidance curbing, let us break down both parts of the term:

1. "Base Erosion" refers to the reduction of the taxable income (i.e., the "tax base") of a country. When an MNC uses aggressive tax planning, it reduces the profits that appear to be earned within a particular country, thereby shrinking that country's tax base — meaning the government collects less tax than it should.

2. "Profit Shifting" refers to the practice of artificially moving profits from one country to another — typically from countries with higher corporate tax rates to countries with very low or zero tax rates (commonly called tax havens). This is achieved through mechanisms such as:

• Transfer Pricing Manipulation: MNCs set artificial prices for transactions between their own subsidiaries in different countries to move profits to low-tax locations.
• Exploiting Tax Treaty Loopholes: MNCs use gaps and mismatches between different countries' tax rules to reduce or avoid tax altogether.
• Debt Loading: Subsidiaries in high-tax countries are loaded with debt so that interest payments reduce their taxable profits.
• Intellectual Property (IP) Shifting: Valuable IP like patents or trademarks are registered in low-tax countries, and high royalty payments are made to those locations, draining profits from high-tax nations.

The OECD (Organisation for Economic Co-operation and Development) and the G20 nations jointly launched the BEPS Action Plan in 2013, which consists of 15 specific action points aimed at closing loopholes and ensuring that corporate profits are taxed where the economic activity generating those profits takes place. This global initiative is specifically designed to curb tax avoidance and evasion by large multinational companies.

Now let us see why the other options are incorrect:

• Option 1 — Mining operations by MNCs in resource-rich but backward areas: This relates to the concept of resource extraction or issues like Dutch Disease or resource curse — not BEPS. BEPS is strictly a taxation/fiscal policy concept, not about physical mining.

• Option 3 — Exploitation of genetic resources of a country by MNCs: This relates to concepts such as biopiracy and is governed by frameworks like the Nagoya Protocol under the Convention on Biological Diversity (CBD). It has no connection to BEPS.

• Option 4 — Lack of consideration of environmental costs in planning developmental projects: This refers to the concept of externalities and the absence of green accounting or environmental impact assessment — again, entirely unrelated to the tax-specific framework of BEPS.

In Summary: BEPS is fundamentally about how multinational companies exploit gaps in international tax rules to artificially reduce their tax burdens, and the global effort under the OECD/G20 BEPS framework is entirely focused on curbing such tax evasion and avoidance by multinational companies. This makes Option 2 the only correct and precise answer.