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Americas correspondent Catherine Snowdon investigates the relevance and effectiveness of flat taxes

Alvarez & Marsal Taxand, the US member of the Taxand global alliance of independent tax firms, has added two experienced economists to its transfer pricing team in Washington, DC. Mike Murphy has joined as national practice leader and Laurie Dicker has joined as a managing director.

The European Commission's fiscal compliance expert group (FISCO) has advocated a series of changes to fiscal compliance regimes. In a report issued at the end of October, the group said changes to withholding and transaction tax systems to facilitate improvements to reporting clearing and settlement of cross-border securities transactions.

Glen DeSouza Baker & McKenzie will be expanding its transfer pricing capabilities in China by entering into an exclusive alliance with TP Management Consulting (TPMC) in Shanghai.

In view of increasing mergers and acquisitions undertaken by Taiwanese corporations for reorganisation purposes, the Ministry of Finance has recently released the tax ruling, Tai-Tsai-Shuei #9604545320, on October 3 2007. The tax ruling stipulates that when a company transfers its independently operated business to its 100% owned existing or newly incorporated subsidiary in exchange of the subsidiary's newly issued shares according to the Enterprise Merger and Acquisition Act and under the principle that the spin-off is not used as a tax avoidance device, the spun-off assets can be transferred at their book value, as the cost of share acquisition, to determine the property trading income/loss and the corresponding tax liability.

Carl Pihlgren In an advance ruling issued on July 6 2007, the National Board on Advance Rulings looked at whether the Swedish shell company rules could apply in a case where a newly established company acquired real estate immediately before its shares were sold to a third party. Normally a sale of shares is tax exempt in Sweden. However, if the sold company is a shell company it is not tax exempt and the whole compensation, without reduction for the acquisition value of the shares, is taxable when the shares are sold.

Suzanne Boers On budget day, traditionally held on the third Tuesday of September (Prinsjesdag), the Dutch government presented its Budget plans for 2008, including the 2008 tax package. The package contains several legislative proposals, which are set to enter into force on January 1 2008 or, in certain cases, on a later date. The proposed changes involve a variety of subjects, such as further reduction of the corporate income tax burden through the extension of the tax brackets, introduction of several environmental charges and the intention to increase the main VAT-tariff. A selection of the proposed changes are summarised below.

Akio Takisaki Along with the recent sharp increase of assessments due to transfer pricing, requests from industry and other taxpayers for improvements of the transfer pricing regulations have been increased. In response to such requests, the Liberal Democrats released a tax reform proposal in December 2006 which included the following three measures:

Rajendra Nayak Ganesh Pai The Delhi Bench of the Income Tax Appellate Tribunal (ITAT) in the case of Sheraton International inc. vs. DDIT [2007] 293 ITR (AT) 68 examined the taxability of a foreign company engaged in the business of providing various services related to hotels. The taxpayer (US Co), a company incorporated in the US, entered into agreements with an Indian company (I Co) for providing services in the nature of publicity, advertisement, sales and reservation of rooms in the hotels of the I Co. It also permitted the I Co to use its brand name and trade mark as incidental to the main services provided. The I Co made a composite payment to the US Co at a percentage of total room sales and not with reference to any particular service. The issue before the ITAT was the taxability of the fees received by US Co from the provision of such services to the I Co. The US Co was a resident of USA within the meaning of article 4 of the double taxation avoidance agreement between India and USA (the treaty) and was eligible for the treaty benefits.

Bill Maclagan Kevin Zimka On September 21 2007, Canada and the US signed a new protocol (the protocol) to the Canada-United States tax convention (the treaty).