Private equity bosses to face MPs

Source: Technology Digital

Date :20/06/2007 09:35:31

The bosses of the UK's leading private equity firms are to appear before a committee of MPs investigating the sector.

The heads of firms including KKR, 3i and Permira are due to testify before the Treasury Select Committee

The committee is investigating whether the sector - accused of using too much debt to finance deals and cutting jobs - needs tighter regulation and to pay more tax.

Reports have said the bosses will concede that the sector is currently under-taxed.

Thanks to tax breaks, private equity firms currently pay just 10 percent tax on gains made on companies they invest in.

Private equity executives pay taxes on their basic pay and bonuses, but a large part of their income comes from ‘carried interest’ - the 20 percent slice of profits they can claim once they have paid back investors.

This money is classed as a capital gain, and as such is subject to a tax level of 10 percent.

The head of SVG, Nick Ferguson, admitted that the tax rates were unfairly low, saying some of those running and investing in private equity were paying tax at a lower level than the people who clean their offices.

Private equity funds have increasingly hit the headlines in recent years, snapping up a growing number of UK companies, including pharmacy group Alliance Boots.

Supporters of the industry warn that increasing the tax would make the UK less attractive to investors.

June 20 2007