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The shares that a company holds in a subsidiary must be cancelled in the case of a merger with the latter. Depending on the circumstances, this cancellation may trigger a capital loss equal to the difference between the tax base of the shares in the accounts of the parent company and the fair market value of these shares at the time of the merger. This capital loss is, in principle, deductible from a tax standpoint, provided that it corresponds to a real decrease in the absorbing company's net assets.

The first International Tax Review Transfer Pricing Forum took place in Amsterdam in September. The key message – transfer pricing is more about risk management than tax avoidance. By Georgina Stanley

The debate over the possibility of the Tobin tax ? a proposed tax on cross-border capital flows, in particular speculative currency transactions ? is widening. Following French prime minister Lionel Jospin's support for the tax, UK foreign secretary Jack Straw has denounced the idea's viability, stating that it is unlikely to work in practice.

Thailand has introduced a new domestic withholding tax regime from July 16 2001 onwards. The key objective of the new law is to expand the scope of withholding tax by subjecting most elements of income to the tax, with the exception of the sale of goods, which is not covered by the new law. This is consistent with the Thailand tax authorities' new tax collection efforts that were introduced earlier this year.

Tim Branston, the former head of tax for the gas and power division of Shell has joined Andersen's Energy and Utilities Group in London as a tax partner.

The US-Luxembourg treaty has finally coming into force. The following article explains why multinationals can look forward to a period of stability. By Phil Warner, Ernst & Young’s International Tax Services group, Birmingham, and David Allgaier, Ernst & Young’s US Tax Desk, London

Under the Mexican Federal Fiscal Code (MFFC), in the case of a merger or spin-off, the transfer of ownership of stock or goods is considered a taxable event, unless certain requirements are met.

DATE TYPE OF DEAL VALUE ACQUIRER TARGET HOLDER ADVISERS TO TARGET ADVISERS TO ACQUIRER ADVISERS TO HOLDER 01/08/01 acquisition ($1.6 billion) £1.1 billion Gallaher Group, financed by Dresdner Kleinwort Wasserstein, Goldman Sachs, Barclays Capital, HSBC 41.3% stake in Austria Tabak n/a Cerha, Hempel & Spiegelfeld, Vienna, Dr Albert Birkner, Edith Hlawati Gallaher - Simmons & Simmons, London; Fried Frank Harris Shriver & Jacobson, New York; Banks - Linklaters, London, Ian Bowler, Giles Horridge, Sulivan & Cromwell, New York n/a 06/08/01 proposed acquisition £2.8 billion ($4.08 billion) Valentia Telecom-munications Eircom Valentia Consor-tium Arthur Cox, Dublin, Caroline Devlin, Niamh Caffrey n/a Freshfields Bruckhaus Deringer, London, Francis Sandison, Tom Passingham; Washington, Claude Stansbury, Kevin Cunningham; Debevoise & Plimpton, New York, Gary Friedman; London, Peter Schuur; A&L Goodbody, Dublin, Peter Maher, Andrew Quinn 06/08/01 tax planning and merger implemen-tation $6.86 billion Schneider/ Legrand n/a n/a n/a Andersen Legal, Paris, Frederic Donnedieu de Vabres n/a 10/08/01 convertible bond issue $500 million South African Breweries n/a JP Morgan Securities, Cazenove & Co n/a Lovells, London, Lyndsey Bainton Linklaters, London, Martin Lynchehan, Simon Marks 21/08/01 acquisition undisclosed Dexia Banque Internationale à Luxembourg Ely Fund Managers Holdings Ltd n/a Wedlake Bell, London, Jack Harper Norton Rose, London, Jeremy Reynolds n/a 31/08/01 share sale $157 million Enterprise Oil Petrobras' UK interests Petrobras Herbert Smith, London, David Mogford, Neil Warriner CMS Cameron McKenna, London, Richard Croker n/a 04/09/01 acquisition $2.2 billion Royal Ahold Alliant Food Service Inc n/a Debevoise & Plimpton, New York, Bob Cubitto, Seth Rosen, Rafael Kariyev White & Case, New York, Mario Fulgieri n/a 05/09/01 development £204 million($297.39 million) The Moor House Limited Partnership Ltd n/a n/a n/a Herbert Smith, London, Isaac Zailer n/a 10/09/01 merger / acquisition $25 billion Hewlett-Packard Company Compaq Computer Corporation n/a Skadden, Arps, Slate, Meagher & Flom, New York, Stuart Finkelstein, Kathy Bristor, Melissa McCann, Patrick Chu Wilson Sonsini Goodrich & Rosati, Palo Alto, Ivan Humphreys, David Gerson, Eileen Marshall n/a 10/09/01 merger $4.2 billion C-MAC Industries Inc Solectron Corporation n/a Stikeman Elliott, Montreal, Frederic Harvey, Luc Bernier; Davis Polk & Wardwell, New York, Kathleen Ferrell, Michael Mollerus Wilson Sonsini Goodrich & Rosati, Palo Alto, Ron Roth, Susie Morse; San Francisco, David Hasen; Osler Hoskin & Harcourt n/a 19/09/01 strategic alliance $1 billion Bristol-Myers Squibb ImClone Systems Incorporated n/a Davis Polk & Wardwell, Michael Mollerus, Kathleen Ferrell, Roy Caner Cravath Swaine & Moore, New York, Stephen Gordon n/a

For some while, the UK Inland Revenue has been committed to reviewing and updating the legislation covering the taxation of foreign exchange gains and losses (forex), financial instruments and corporate debt. A technical note was issued in November 2000 setting out suggestions for change and asking for comment, and at the time of the 2001 budget in March, a press release announced the publication of a further consultative document in the summer.