US proposal threatens PE tax rules
Carried interest viewed in part as income, Congressional Budget Office says
Financial rewards earned by private equity partners should in part be subject
to income tax, according to a senior US finance official.
Peter Orszag, director of the US Congressional Budget Office told Congress
that ‘most legal and economic analysis suggests that carried interest
represents, at least in part, a form of performance-based compensation for
services undertaken by the general partner’, the
Financial
Times reports.
The analysis will add fuel to the private equity tax debate raging on both
sides of the Atlantic.
Orszag warned that as long as there was a difference between the tax rate on
income and capital gains people will try to turn income into capital gain.