Given the recent controversy over the tax structures of multinationals like Google and Starbucks in the UK in recent months, it was only a matter of time before private equity found itself in the firing line.
Sure enough, in October, British trade union Unite called for reform of the tax laws that apply to private equity-backed business, and a specific investigation into Kohlberg Kravis Roberts-backed Alliance Boots, which it claims has avoided £1.12bn in tax.
Unite’s tub-thumping general secretary Len McCluskey accused Boots of “fleecing” Britain. “The company went into massive debt to fund its 2007 buyout and is likely to have apportioned this liability to reduce its corporation tax bill by approximately 95 percent.”
Alliance Boots insisted it “organises its tax affairs strictly in compliance with all applicable law and observes the highest standard of good ethics”. KKR declined to comment.
Tim Hames, director-general of the British Venture Capital Association, was rather less circumspect, calling Unite’s attack “an almost psychopathic hostility to an outstanding success story.” Boots’ investment in the UK had created new stores and additional jobs, he said.
Of course it’s unfair of Unite to single out Alliance Boots like this (it didn’t even bother to contact the company before publishing its report). But that’s beside the point.
Trade unions have had some success before by aggressively targeting private equity firms (notably the GMB with Permira). And in the UK’s current febrile political environment, with a general election just 18 months away, the industry should brace itself for more attacks along these lines in the coming months. ?