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In December 2004, the EU Council of Ministers agreed on proposals to amend the EC Mergers Directive to improve the relief available to companies operating in Europe. The most important changes to the directive are as follows:

The "butterfly reorganization" is the name in Canada for the type of reorganization by which a Canadian corporation, call it the distributor, can distribute property to one or more of its corporate shareholders on a tax-deferred basis. These reorganizations can be done by private corporations or public corporations, and can take the form of a "split-up", whereby one or more shareholders receive their share of the distributor's assets and cease to be shareholders of the distributor, or a "spin-off", whereby the distributor makes a distribution to a new corporation owned by the same shareholders as the distributor and in the same proportion. In 2001, rules were introduced to facilitate spin-offs by public companies. The Department of Finance has now recommended further amendments to the Federal Income Tax Act to provide additional relief for public company spin-offs.

PricewaterhouseCoopers

At the outcome of the cabinet meeting on December 23 2004, the Belgian government announced plans to introduce legislation in June 2005 that will allow companies to deduct a notional (deemed) interest deduction on equity and retained earnings (not stated in the accounts) in calculating the taxable base. This measure will alleviate the different tax treatment between debt and equity, that is, borrowing or equity financing. At present, companies have more to gain from debt than equity financing, because loan interest is tax-deductible and dividend distributions are included in calculating the company's taxable base. In addition, Belgian tax law knows no general thin-capitalization rules.

The new Belgian collateral and securities lending tax legislation is an attempt to create consistent rules for this type of transaction, explain Kurt De Haen and Jessica Win of PricewaterhouseCoopers

The new year has just begun and already the European Commission has published two pieces of research on company tax. And despite the low number of participants in each survey, the Commission believes they reflect enough support for increased corporate tax cooperation.

Deloitte & Touche/Hana have concluded their merger negotiations with Anjin Deloitte. Since April 2002 the two firms had been operating as one firm as far as the law allowed with a memorandum of understanding arrangement. The merger was completed on January 30 2005.

Tom Scott: was impressed by KPMG's resources in international tax advice Tom Scott, the veteran former Linklaters partner, has left the international law firm to join KPMG's London tax practice. In an interview with International Tax Review, Scott said the move would allow him to develop stronger relationships with clients.

The government recently announced Oman's budget for 2005. The budget estimates a deficit of about $1.4 billion, which is based on a conservative oil price of $23 per barrel. The deficit is 6% of the projected GDP. The actual oil revenue realization during 2004 was $33.90 per barrel against the 2004 budgeted price of $21 per barrel. The increase in oil price during 2004 helped eliminate the entire budget deficit for 2004. There were no additional borrowings during 2004 and Oman's GDP grew by 12.5% during 2004. The growth rate in 2003 was 6.9%.

The Internal Revenue Service (IRS) started the new year on a positive note by issuing proposed regulations that provide for the first time that a statutory merger under foreign law may qualify as an A reorganization.