Will BEFIT Lead to Accounting Shopping?

This article examines whether the European Commission’s proposed Business in Europe: Framework for Income Taxation (‘BEFIT’) may incentivize ‘accounting shopping’ within the EU. BEFIT seeks to establish a common corporate tax base for large multinational groups and relies to a significant extent on financial accounting results prepared under International Financial Reporting Standards or national Generally Accepted Accounting Principles. Since the proposal remains formally pending but politically uncertain, the article treats BEFIT not as an imminent legislative outcome but as a design case study for future accounting-based tax-base harmonization in the EU. This design raises the question whether differences between accounting standards, combined with managerial discretion in financial reporting, could enable multinational groups to minimize their taxable income by selecting or exploiting more favourable accounting frameworks. The article analyses this risk against the broader objectives of BEFIT, namely simplification, neutrality, predictability, and the creation of a level playing field within the internal market. It argues that BEFIT does not inevitably lead to accounting shopping, but that the proposal creates structural incentives that cannot be ignored. The risk is particularly linked to the coexistence of different accounting standards, the possibility of earnings management, and the limited harmonization of tax-relevant accounting rules. The article therefore concludes that BEFIT would not create unrestricted accounting manipulation, because accounting law, audit, general anti-abuse rules and Pillar Two would constrain the risk. Its residual vulnerability lies in permissible accounting-standard and accounting-policy choices that materially affect the common tax base. Any BEFIT successor should therefore incorporate Pillar Two-style reconciliation and anti-arbitrage safeguards.