Terra Firma CEO leaps to private equity defence
Buyout giant Guy Hands defends low tax rates for private equity remuneration
Guy Hands, the chief executive of Terra Firma, has made a robust defence of
the taxation of private equity bosses, arguing that the low tax rate they enjoy
is fully justified.
In a letter to the Financial Times, Hands said that the carried
interest paid out to buyout bosses should only be taxed at 10% as it rewarded
risk and entrepreneurship.
‘While the definition of carry may vary across private equity firms, it was
originally intended to cover a payment to individuals of a private equity firm
who invested their own money,’ Hands said.
He questioned whether listed company executives would be happy to accept the
same level of risk as private equity heads did in order to enjoy a lower tax
rate.
‘I do wonder how many FTSE100 chief executives would be prepared to take the
risk of abolishing their bonuses and option schemes in return for capital
gains-based carry which would only start to be paid if they delivered real
shareholder value in excess of 8% compound over a seven-year period,’ Hands
said.
Hands also issued a veiled criticism at veteran buy-out heads who had
benefited from the low tax on carried-interest in the past but had now publicly
criticised the tax rate.
‘These grandees and private equity critics might all do well to think through
the long-term consequences of any proposals they make, rather than playing to
the gallery,’ he said.
Further reading:
Go here to find out why carried interest has become so
controversial
Steps the Treasury could take to tax
buyout bosses at a higher rate
Read what the Unions have to say about
private equity taxation