The current row over private equity must not come at the cost of entrepreneurial spirit in Britain, businesses have argued.
Responding to the Treasury Committee’s interim report into private equity, the British Chambers of Commerce (BCC) stressed that any measures to clamp down on unfair tax avoidance through capital gains relief must take into consideration the impact on small businesses.
BCC director general David Frost said: “While the BCC recognises the advantages private equity managers can take of capital gains taper relief to pay lower rates of tax, we worry that any knee jerk changes could have serious implications for the entrepreneurial culture embedded within our membership.
“Through private equity, budding entrepreneurs invest in business, taking on the risk of attempting to run them successfully. The current capital gains system provides incentives for these entrepreneurs to do so, with the vast majority building on these investments to drive growth and create jobs.”
Frost urged the government to ensure ‘no change is considered which would impair the incentives for these entrepreneurs’.
However, TUC general secretary Brendan Barber said the Treasury’s report endorsed the need for more ‘openness and transparency’ in the private equity industry, and raised similar concerns to those posed by the unions.
“[The report] worries whether private equity makes its returns from financial engineering rather than business success,” added Barber.
“It wants the Treasury to review the tax paid by private equity investors, and calls into question the ease with which the super-rich can claim non-domiciled tax status.”
© Crimson Business Ltd. 2007
