The Guardian has reported that:
Ed Balls, economic secretary to the Treasury, ruled out any major tax changes to the treatment of private equity during a debate in the Commons last night.
Which makes a mockery of the review of these issues to be delivered prior to the Pre-Budget Report later this year.
He went on to say he was concerned:
about the lack of transparency in the industry
Given his previous announcement some might be worried about the lack of accountability within the Treasury.
We should be concerned about his view of the long term, as he's reported to have said:
"private equity improved long term prospects for firms and created new jobs and investment"
He recently explained that this 'long term' was three years. That's the average period of ownership of a company by a private equity concern. He explained in a recent speech he thought this a more serious commitment to the long term than that offered by the City of London where the average holding period of a share by major funds is under two years. In the process he showed a remarkable lack of understanding about the difference between portfolio and direct investment. Which is worrying.
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In some investment companies, the average investment time is 7 seconds. 15 seconds is seen as a long term investment by those traders. Figure that.
On average the entire market changes hands in 7 months, which is completely illogical as the profile of ownership remains largely unchanged.
It’s simple gambling – with other people’s money and being paid well to do it.
Skill quotient = very low.
That’s my figuring of that!
These traders use computer programs to help them – it’s called alogtrading where they run these programs in real-time based on game theory and Monte Carlo simulations.
It’s pretty serious rocket science and the sims are based on economic theory.
What it shows is that the market need not have an ethical sense when you can reduce the assets of a publicly traded company to a series of electrons. Worth considering because it is a strong argument for the free marketers who don’t see the need for tax justice of the kind you prescribe.
Actually, it’s a strong argument for regulating markets which are not working in the intreests of the economy as a whole by increasing the tax take on those who trade in this way