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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

In an attempt to halt tax evasion, Germany's tax authorities are to consider offering rewards for information on evaders. Deputy finance minister Jurgen Stark announced on January 7 1998 that guidelines have already been agreed. To avoid being swamped by vindictive informants, the scheme is likely to apply only to large amounts of unpaid tax.

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

Fred Meyer, the US grocery chain, has reached agreement to purchase two rival chains; Quality Food Centers and Ralphs Grocery. Fred Meyer turned to law firm Simpson, Thacher & Bartlett in New York. Tax partner Steven Todrys is working on the transactions.

The Spanish government is to privatize Aceralia, the leading steel group in Spain. The value of the transaction is Pta123 billion ($816 million), but this will increase to Pta137 billion on excercise of the over-allotment option.

A decision of the European Court of Justice shows that most EU member states have not correctly implemented the parent-subsidiary directive 90/435 of July 23 1990 (October 17 1996; Denkavit). A law of December 23 1997 is Luxembourg's response to this case law. Concerning the exemption of dividends received by a Luxembourg company, a participation of 10% of the subsidiary's share capital (or having an acquisition value of Lfr50 million) must be held for 12 months. This holding period may be satisfied before or after the relevant dividend distribution. Before 1998, a holding period of 12 months at the end of the year of distribution was required. No exemption was therefore available for dividends received by a Luxembourg parent from a subsidiary, the shares of which had been held for a long period of time, but were alienated before the end of the financial year. Despite the compliance with the holding period requirement of the parent-subsidiary directive, these dividends were taxable in Luxembourg.

Tax reform in Switzerland has revitalized the Swiss holding company regime. Peter Riedweg of Homburger Rechtsanwälte, Zurich looks at some of the regime’s new features, which include a capital gains tax exemption for qualifying participations

From: Jefferson VanderWolk

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.