Base Erosion and Profit Shifting, Tax Treaty Networks, and Revenue Loss in Developing Economies: The Nigerian Experience

This study provides a comprehensive empirical and policy analysis of base erosion and profit shifting activities by multinational enterprises in Nigeria, examining the revenue implications of Nigeria's tax treaty network and the effectiveness of OECD BEPS action plan measures in the Nigerian regulatory context. BEPS activities, including transfer pricing abuse, debt shifting, treaty shopping, and intellectual property location strategies, are estimated to cost developing countries billions of dollars annually in foregone tax revenues. Nigeria, as the largest economy in Africa with significant multinational enterprise activity, represents a critical case for evaluating BEPS impacts and responses. This study uses a mixed-method design, combining quantitative analysis of corporate financial data from FIRS assessments and Bureau Van Dijk Orbis database records for 120 multinational subsidiaries in Nigeria with qualitative analysis of Nigeria's double tax treaty provisions and BEPS implementation progress. BEPS risk is estimated using profit shifting indicators including profit rate differentials, related party transaction intensity, and debt-to-equity ratios. Revenue loss is estimated using the rate differential approach augmented by profit shifting regression estimates. The study develops an original BEPS vulnerability index for Nigeria's tax treaty network. Results indicate that Nigeria loses an estimated 1.8 to 2.4 billion US dollars annually to BEPS activities, with the oil and gas, pharmaceutical, and digital services sectors as the highest-risk segments. The study contributes an original taxonomy of BEPS risk factors specific to Nigerian institutional conditions and recommends priority BEPS countermeasures calibrated to Nigeria's administrative capacity and treaty renegotiation timeline.

Keywords: BEPS, transfer pricing, tax revenue loss, Nigeria, multinational enterprises.