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Reed Elsevier is to dispose of its consumer magazine group IPC in a deal worth £860 million ($1.38 billion). The purchasing MBO group is financed by Cinven, with debt underwritten by Goldman Sachs. Freshfields acted for Reed Elsevier, with tax advice from partner Colin Hargreaves and manager Isabel de May.

The US Internal Revenue Service (IRS) announced on January 16 1998 that it will clamp down on the use of hybrid branches that simultaneously reduce foreign tax and defer US tax. A number of US power companies engaged in overseas power projects use these entities. Offshore holding companies are formed for foreign investment, and the payment of US tax is deferred until earnings have been repatriated to the US. Since January 1997, US companies could check the box to ensure that foreign entities, with a single owner, were treated as transparent for US tax purposes.

Japan's government has proposed extensive tax cuts to boost economic growth, against a background of bankrupt banks and securities houses. The package, announced in December 1997, includes cuts of ¥2 trillion ($15 billion) in income tax, and ¥840 billion in corporation tax (for related coverage, see this issue, page 48). Announcing the cuts, prime minister Hashimoto said Japan would not be responsible for pushing the global economy into recession. The package is expected to be adopted in the Japanese parliament, yet has been criticized for being inadequate and misdirected.

On December 5 1997, Russian president Boris Yeltsin convinced the Duma to accept the 1998 budget at the first of three readings. Nevertheless, the decrepit taxation and budgetary system continues to hinder potential economic growth. Tax collection in Russia remained poor in 1997. David John, tax partner at Price Waterhouse in Moscow, says tax collection this year represented 52% of the budget. Government expenditure in 1997 represented 18.3% of GDP, while tax revenue was just 10.8%. The promise of radical revenue collection methods has failed to disguise a deteriorating system.

The first budget statement delivered on December 3 1997 by the new minister for finance, Charlie McCreevy, was also the first budget to be delivered before the start of the financial year. The minister used the opportunity presented by very high economic growth rates, and the resulting tax buoyancy, to make a number of significant tax changes. The minister has confirmed that with effect from January 1 2006, the standard corporation tax rate applicable to the trading profits of non-manufacturing companies (including financial services companies operating in the Dublin docks area whose 10% tax rate expires on that date) will be 12.5%. A higher rate of 25% will apply to the non-trading income of those companies. Manufacturing companies will continue to benefit from the lower 10% manufacturing tax rate until it expires at the end of 2010.

Germany’s ambitious and comprehensive programme of tax changes has not been realized, but Felix Klinger of Schitag Ernst & Young, Frankfurt alerts readers to the real reforms that have been effected in the shadow of this programme

The problem of surplus advance corporation tax has long been the bane of the UK multinational’s life. Now the ACT system is set for abolition. Murray Clayson of Freshfields, London considers the consequences, and the likely form of a successor shadow system

As the globalization of US multinationals proceeds at an ever-faster pace, tax planning opportunities can sometimes be overlooked. Capital restructuring is one such opportunity. Eli Fink and Eric Overman, Deloitte & Touche, New York examine the potential tax savings

After losing out to its Asian neighbours in attracting a number of big investment projects, the Australian government has announced a new investment programme which includes tax incentives. Ian Dinnison, of KPMG, Melbourne reports on the new attractions

Fee income figures for the big six firms show that the corporate appetite for international tax advice is voracious. Four of the firms plan mergers to help service this demand but, as Phillippa Cannon reports, alternative strategies exist