TaxCorporate TaxTax authorities raise private equity fears

Tax authorities raise private equity fears

Officials claim the rapid growth of the private equity industry is placing tax revenues at risk

Tax authorities around the world have expressed their concern about the
growth of private equity, claiming that the mass shift in private ownership will
undermine efforts to persuade large businesses to be open about their tax
affairs.

At a meeting held in Seoul top revenue officials noted ‘the increased flows
of capital into private equity funds, and the potential issues this may raise
for revenue bodies’, the FT reports. The officials were concerned that
private equity was less likely to be transparent about their tax affairs than
listed companies

The concerns raised at the international meeting compound long-standing
worries of the UK taxman that the growth of private equity may damage tax
revenues, because they typically used high levels of leverage and offset
interest rate costs against tax.

At the meeting the officials also targeted advisers, and commissioned HM
Revenue & Customs to examine the role of lawyers and accountants in
non-compliance and unacceptable tax planning.

HMRC will consider the benefits of a registration system for tax advisers
working on tax returns, penalties for advisers who promote abusive schemes, and
the requirement to make an early warning to authorities about any new tax
avoidance schemes.

Loughlin Hickey, global head of tax at KPMG, said authorities would be better
off focusing their attention on reducing red tape, which would stop the advance
of private equity.

Hickey also criticised officials mixing up non-compliance with tax
minimisation, which damaged the relationship between advisers and tax
authorities.

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