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The government of Singapore has extended tax breaks to Singapore-based audit, accounting, and law firms to strengthen the country’s position as an international hub for headquarters operations and to encourage professional service firms that are structured as partnerships to expand their operations.

The European Court of Justice ruled on March 11 2004 that the French legislation taxing unrealized capital gains simply because a taxpayer moves to another EU member state infringes the freedom of establishment (case C-9/02 Hughes de Lasteyrie du Saillant).

In 1998 the IRS and the Treasury Department got the attention of the outbound international tax community by issuing Notice 98-5. The notice sought to challenge certain tax-motivated transactions that generated foreign tax credits (FTCs) by testing their substance under an economic profits test. The transactions described in Notice 98-5 were later included as "listed transactions" subject to the tax shelter disclosure, registration and list maintenance requirements.

The Slovak parliament has overridden President Rudolf Schuster's March 29 2004 veto of the proposed value added tax (VAT) law. The proposed law is set to take effect on May 1 2004, the day Slovakia joins the EU, and would introduce a flat 19% VAT rate.

GlaxoSmithKline Holdings on April 2 2004 filed a petition in the US Tax Court contesting a multibillion-dollar transfer pricing claim. The US Internal Revenue Service (IRS) made its claim in January against Glaxo US, a US subsidiary of the UK-based pharmaceutical manufacturer GlaxoSmithKline.

On April 8 2004 the Senate approved President Bush's nominee, Donald Korb, as Chief Counsel of the Internal Revenue Service and assistant general counsel at the Treasury. Korb, a partner in the Cleveland office of Thompson Hine, started his career in the Office of the Chief Counsel of the IRS from 1974 to 1978 and returned to the IRS as assistant to the commissioner from 1984 to 1986 coordinating the process that led to the landmark Tax Reform Act of 1986.

On April 8 2004 the Senate reached agreement on limiting the range of amendments of the Jumpstart Our Business Strength (JOBS) Act allowing debate on the Bill to resume. The sheer number and range of amendments had caused the Bill's progress to stall. The Bill was designed to replace the foreign sales corporations/extra-territorial income provisions that the WTO had ruled illegal with the EU imposing sanctions worth $4 billion from March 2004.

The US Justice Department and the IRS highlighted their crackdown on tax evasion on April 6 2004. The number of individuals referred for criminal prosecution for tax violations has increased by 35% over the last year. But evasion by corporate taxpayers still remains a big problem according to the General Accounting Office, the US Congress' independent investigative arm. It estimated that more than 60% of companies paid no tax between 1996 and 2000.

In the May 2002 issue of International Tax Review (page 58), we reported on a decision by the Cologne Tax Court interpreting language contained in article 23(3) of the former tax treaty between Germany and Canada as a subject-to-tax clause and giving this clause precedence over provisions in the treaty by which items of income "shall be taxable only" in Canada. On appeal, the Federal Tax Court (FTC) has now overruled both the lower court decision and its own 1992 holding on point (judgment of December 17 2003, IR 14/02).

The Spanish CIT law has been reformed for tax years commencing on 2004, to further improve the tax credits for research and development (R&D) and innovation activities.