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The draft amendments to the Tax Code have passed two readings in the State Duma (the lower chamber of the Russian parliament). The amendments include a broad list of changes in taxation, most of which are technical in nature and intended to eliminate ambiguities in recently introduced chapters of the Tax Code. Nonetheless, some of the proposed amendments may have a substantial impact on the taxation of foreign investors in Russia. The most important amendments are summarized below.

As a consequence of the 2002 comprehensive Mexican tax reform approved by Congress, the Mexican Income Tax Law now considers that when a Mexican tax resident entity ceases to be a Mexican resident under the rules established in the Mexican Federal Tax Code (ie when it changes its tax residence to a country other than Mexico), it will be deemed to be liquidated for Mexican tax purposes. The purpose of this change is to avoid the transfer of Mexican taxable income to a foreign country, as such a transaction is detrimental to the Mexican Treasury Department.

The Spanish government has initiated a process to partially reform personal income tax by commissioning a committee of experts, chaired by Professor Manuel Lagares, to prepare a report on the fundamental aspects of the tax and then draft a bill. The bill has been sent to the Spanish lower house.

The French tax authorities have issued new administrative guidelines dated April 16 2002 (8 M-2-02) in which they give up taxing real estate capital gains realized by a French partnership held by non-residents under section 244 bis A of the French Tax Code.

Canada announced that its new transfer pricing rules would simplify the APA process for companies. Unfortunately, this is certainly not the case. Hendrik Swaneveld, Martin Przysuski and Venkat Nagarajan of BDO Dunwoody, Toronto (Markham), report

Singapore’s budget aims to encourage economic progress at a time of political uncertainty and intense competition. Taxation targets enterprise and growth, while attracting global talent. By Ajit Prabhu, Deloitte & Touche, Singapore

The recent UK budget announced changes that will make corporate compliance more complex. Simplicity and fairness may be the aim, but achieving it is going to require more hard work for practitioners. Derek Jenkins, PricewaterhouseCoopers, London

Financial statements are due to come under increased scrutiny following the Enron bankruptcy. Intercompany pricing once again finds itself in the spotlight. By Steven D Harris and Paul B Burns of KPMG, Washington, DC and Costa Mesa

The biggest surprise to come from this year's Australian federal budget was the announcement by treasurer Peter Costello on May 14 of an A$1.2 billion ($6.68 million) cash deficit in 2001-2002, attributed mainly to the war on terrorism along with disappointing tax revenues. As such, this year's budget provides for an underlying cash surplus of A$2.1 billion and lays the foundations for surpluses right across the forward estimates. Much of this will continue to fund further defence spending, which the treasurer says will rise by A$1.3 billion to A$14.1 billion in the financial year starting July. A further A$2.54 billion is to be allocated to border protection and domestic security. A large part of this will be funded by extra costs on Pharmaceutical Benefits Scheme (PBS) drugs, and tougher eligibility tests for disability pensions.

The US is once again taking a hard line with tax avoidance. Not only are there two bills before Congress proposing the end of corporate inversions, but also, in Notice 2002-35, the Internal Revenue Service has informed taxpayers that it is aware of a transaction involving notional principal contracts used to generate tax losses. It has stated that the tax benefits of this will no longer be allowed for federal income tax purposes.