Richard Lambert, director-general of the industry body Confederation for British Industry, has backed examination of the tax treatment of the industry and demanded more transparency, according to media reports.
Talking about buyout firms at the meeting of British unions the TUC Congress, he said: “They find themselves in a different role and this has to be recognised . . . It is important that private equity companies disclose more than they have been doing.” Lambert called for a greater examination of the industry’s tax obligations. “If it is a duck, tax it as a duck”.
In the UK, the tax treatment and legal requirements of private equity have been the subject of widespread political attention. A flashpoint in the debate is the capital gains tax relief on carried interest, which allows managers to to pay as little as 10 percent tax on this portion of their earnings.
The unions were more outspoken about the way the industry operates. Jack Dromey, deputy-general secretary of union Unite said: “Private equity makes the Cosa Nostra look like a model of openness and transparency by comparison.”
Maria Ludkin, of the GMB union, was unimpressed by executives’ pretensions to importance: “These people aren’t masters of the universe, they are simply slick operators who have worked out how to work the system. It is not difficult to become wealthy if you pay less tax than your cleaner.” The latter a reference to a comment by Nick Ferguson, chairman of SVG Capital, who ignited the debate about tax this summer when he noted his tax rate than his cleaner's.
Lambert and the unions also discussed the way the UK tax system operates and questioned the ability of non-domiciled companies to evade tax in the United Kingdom. “It is important that the tax system is fair and there are not whacking loopholes. We need to know more about the non-domiciles, about the benefits they bring, about their numbers. It is a legitimate question to ask,” Lambert said.
Dromey was more blunt, referring to the industry’s attempts to implement a self-regulatory code-of conduct at the behest of David Walker, he said: “Self-regulation in the Cayman Islands? In the immortal words of John McEnroe, you cannot be serious.”