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| Equity bosses to testify to MPs | Equity bosses to testify to MPs |
| (about 1 hour later) | |
| Bosses of leading private equity firms are expected to face a tough grilling when they appear before a committee of British MPs later. | Bosses of leading private equity firms are expected to face a tough grilling when they appear before a committee of British MPs later. |
| The heads of firms such as KKR, 3i and Permira are due to testify before the Treasury select committee. | |
| It 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. | It 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 admit their sector is currently under-taxed. | Reports have said the bosses will admit their sector is currently under-taxed. |
| Thanks to tax breaks, private equity firms currently pay just 10% tax on gains made on companies they invest in. | Thanks to tax breaks, private equity firms currently pay just 10% tax on gains made on companies they invest in. |
| It could be very un-clever to put a heavy tax regime on to the private equity market John Moulton, Alchemy Partners class="" href="/1/hi/business/6221466.stm">Q&A: Private equity debate | |
| Private equity funds have increasingly hit the headlines in recent years, snapping up a growing number of UK companies, such as pharmacy group Alliance Boots. | Private equity funds have increasingly hit the headlines in recent years, snapping up a growing number of UK companies, such as pharmacy group Alliance Boots. |
| Private equity executives pay taxes on their basic pay and bonuses, but a large part of their income comes from carried interest, or the 20% slice of profits they can claim once they have paid back their investors. | Private equity executives pay taxes on their basic pay and bonuses, but a large part of their income comes from carried interest, or the 20% slice of profits they can claim once they have paid back their investors. |
| This money is classed as a capital gain and, as such, is subject to a tax level of 10%. Critics say it should be charged at a normal tax rate. | This money is classed as a capital gain and, as such, is subject to a tax level of 10%. Critics say it should be charged at a normal tax rate. |
| Transparency | |
| Speaking to the BBC's Today Programme, private equity boss John Moulton conceded that many people involved in the industry were paying little or no tax, but he said it would be unwise to change the system. | Speaking to the BBC's Today Programme, private equity boss John Moulton conceded that many people involved in the industry were paying little or no tax, but he said it would be unwise to change the system. |
| "If the government increases the tax on the private equity industry sharply, a very large chunk of it can move offshore and go from paying some tax to paying no tax," said Mr Moulton, who is chairman of Alchemy Partners, the fund that tried unsuccessfully to buy Rover cars. | "If the government increases the tax on the private equity industry sharply, a very large chunk of it can move offshore and go from paying some tax to paying no tax," said Mr Moulton, who is chairman of Alchemy Partners, the fund that tried unsuccessfully to buy Rover cars. |
| So it could be very un-clever to put a heavy tax regime on to the private equity market." | So it could be very un-clever to put a heavy tax regime on to the private equity market." |
| Last week, Peter Linthwaite, the head of the British Private Equity and Venture Capital Association, which represents the UK's private equity industry, unexpectedly resigned after he was widely criticised for a weak showing before the committee. | Last week, Peter Linthwaite, the head of the British Private Equity and Venture Capital Association, which represents the UK's private equity industry, unexpectedly resigned after he was widely criticised for a weak showing before the committee. |
| Regarding the taxation of the private equity industry, the Treasury select committee is looking at four main areas - treatment of debt and equity, carried interest, stamp duty and the role of taxation, and the competitiveness of the UK's tax regime. | |
| Concerning transparency, it is studying such factors as market abuse and conflict of interest, and the ranking of risk. | Concerning transparency, it is studying such factors as market abuse and conflict of interest, and the ranking of risk. |
| The committee is also looking at the longer-term potential risk and financial stability of private equity funds. |