Private equity in public doghouse
TEXT OF INTERVIEW
Scott Jagow: Tomorrow, private equity firm Blackstone Group will give Wall Street the price of its IPO. As this is happening, Congress is looking at dramatically increasing taxes on private equity groups that go public like this. And in Britain, lawmakers are also scrutinizing private equity. We turn now to our man in London, Stephen Beard. Stephen, what’s happening today?
Stephen Beard: Well the bosses of some of the U.K.’s top private equity firms, including the British subsidiaries of the big American firms like Blackstone and KKR, are appearing before a parliamentary committee today and it’s widely expected they’re going to get a comprehensive kicking.
Jagow: Over what?
Beard: Well the same sorts of things that are making private equity unpopular in the U.S. The argument is that they’ve been feeding off large listed companies, loading them down with debt, laying off workers and there is now too this additional charge of not paying enough tax. Many of these private equity firms apparently pay only 10 percent tax whereas the corporation tax is more than double that. This is actually due to a tax break that was introduced to encourage small entrepreneurs but the fat cats of private equity are lapping up this cream.
Jagow: How does private equity in Britain intend to defend itself here?
Beard: Well it has so far defended itself very poorly and there’s no doubt there is a clamor developing here. I mean the public is calling for a tax crackdown. So far however the British government has resisted all these calls, saying if we slap a significantly higher tax rate on private equity firms, they’ll go offshore, which is easy enough for them to do and then the U.K. will miss out on the amount of tax that they do actually pay..
Jagow: Alright Stephen keep us posted, thanks a lot.
Beard: OK Scott.
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