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A recent decision by the Federal Tax Court illustrates the limited reach of the general anti-avoidance clause in the German tax code (Judgment of March 20 2002 – I R 63/99 – released in July 2002).

The US Internal Reveunue Service (IRS) is strengthening its anti-tax shelter stance and has set new audit priorities. The strategy is designed to focus on key areas of non-compliance and will hit promoters of the schemes first before aiming to identify participants in the tax evasion efforts.

The United Arab Emirates Offsets Group, the majority owner of the $3.5 billion Dolphin Energy Project, is selling 24.5% of the venture to Occidental Petroleum. The project includes the construction of a 260-mile natural gas pipeline from Qatar's offshore North Field to the UAE. Occidental Petroleum has replaced Enron as the third partner in the venture, alongside the UAE Offsets Group and the French company Total Fina Elf. Shearman & Sterling provided tax advice, with Alfred Groff and Carol Ann Johnson in Washington representing UAE group.

Multinational groups that operate in a large number of taxing jurisdictions face challenges in demonstrating compliance with the arm's-length standard. Among the growing number of countries that demand contemporaneous documentation, there is very little commonality in requirements. This makes it difficult to achieve economies of scale in the preparation of documentation.

Foreign investors in China wishing to take advantage of the post-WTO business environment need to align clearly their business tax strategies and carefully adopt tax-planning techniques to optimize the tax position before and after the deal. By Billy Hsieh and Sandy Cheung, PricewaterhouseCoopers, Shanghai.

The EU trade war with the US took another step forward in August when the European Commission revealed its list of US products that could potentially be subject to countermeasures.

Singapore has simplified its stock-option system, so that Singapore-based foreign workers exercising their stock options after they leave their jobs will be treated for tax purposes as though they exercised them when they leave employment. The revenue will refund the difference if the gains are lower than deemed when actually exercised. This makes it easier for both employers and employees, as previously employers had been forced to track foreign employees when they left the country until they exercised their stock options.

The Brazilian government has attempted to help hard-up manufacturers by ending cumulative taxes on companies.

EU commissioner Frits Bolkestein has expressed his dissatisfaction with Switzerland's continued resistance to the EU savings tax package. Switzerland proposed a retention tax on savings of EU residents, but the EU has rejected this as inadequate because it wants the country to agree to exchange of information provisions. Bolkestein stressed that though applying sanctions of some sort was a possibility, it was too early to speculate. He is due to report on the negotiations on October 8 this year.

The Institute of Directors is urging the UK government to change its tax policy. Its survey of UK business leaders indicates that business is concerned about the government's fiscal policy.