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The UK government warned the Cayman Islands, a British dependent territory and one of the world's largest offshore centres, that it could face regulatory changes to comply with EU savings tax rules. The proposed changes relate to exchanging information between tax authorities as a way of increasing revenue and tackling avoidance and fraud.

In March 2003, the previous financial secretary, Antony Leung, proposed in his Budget speech an increase in the assessable profits deemed rate on royalties received by a non-resident under section 21A of the Inland Revenue Ordinance (IRO) from 10% to 30%. The proposed amendment to the IRO was enacted in mid-July. At the same time the Commissioner of Inland Revenue (CIR) issued a revised Inland Revenue Departmental Interpretation and Practice Note 22 (DIPN 22) explaining the effects of the amendment.

The UK Treasury is to review the heavy tax break that users of liquefied petroleum gas (LPG) receive. Carmakers and oil companies are lobbying to maintain the substantial subsidy for LPG that has been in place since 1996.

President George W Bush claimed that his controversial tax-cutting policy is beginning to have a positive effect on the US economy. Critics of the changes say that the tax cuts only benefit the wealthiest individuals and have done nothing to persuade cautious companies to start hiring again.

The Indian government has decided to establish a national tax tribunal to hear tax dispute cases. But professional bodies have criticized the tribunal, which will replace the system where tax disputes are heard in the High Court and the Court of Appeal.

The government of South Korea is planning to simplify the tax code and offer more tax breaks to foreign companies in a bid to increase inbound investment. In measures expected to take effect next year, manufacturing firms will receive tax breaks on investments of over $30 million (previously over $50 million).

A draft Trade Tax Reform Act was approved by the German cabinet on August 132003. Under the German constitution and the revenue-sharing arrangements currently in place, the revenue from the trade tax is largely payable to municipal government (cities and local governmental subdivisions) to help defray the additional infrastructure cost caused by commercial businesses located in the respective municipalities. A decline in the revenue from this tax is partially responsible for the severe economic difficulties many municipalities are experiencing. The reform of this tax is the subject of intense political controversy.

In a decision dated June 20 2003 (Conseil d'Etat, n 224407, Sté interhome AG), the French Administrative Supreme Court had to interpret the permanent establishment concept in the light of the tax treaty signed between France and Switzerland.

The European Court of Justice (ECJ) decided on September 18 2003 in the Bosal Holding BV case that the Dutch tax rule that denies a deduction for expenses relating to foreign participations, while allowing expenses with respect to Dutch participations, is illegal under the EC Treaty. The decision confirms the earlier opinion of the advocate general. The Netherlands is expected to introduce thin-capitalization rules to mitigate the future impact of the decision.

Following the March 2003 issuance of the Provisional Regulations on Mergers and Acquisitions of Domestic Enterprises by Foreign Investors, the State Administration of Taxation (SAT) issued a circular clarifying the tax treatment of such acquisitions. In particular, the circular confirms that if a foreign investor's equity in the new enterprise exceeds 25%, the new enterprise will be treated as a foreign invested enterprise (FIE) for tax purposes and therefore will be eligible for the preferential tax treatments granted to FIEs. Further, the circular clarifies the following points: