Quite a lot of comment today suggests that the private equity industry is willing to agree that 10% is too low a rate of tax for what they earn. The suggestion is that they will bargain something between there and 40%, which is the income tax rate.
I have two comments. The first is that the right rate of tax is that which is charged for everyone else. So it's 40% top rate income tax that is needed, capital gains tax is not an issue for individuals since the earnings of private equity partners result from a trading activity and for companies the right rate is 30% at this moment. If this business cannot compete on this level field then it should not be in the market. That's the first issue resolved.
The second one is as clear. Booking UK earned profits offshore is an unacceptable practice in this (and any other) sector. It's time to revisit what constitutes the definition of residence for corporation tax to make sure that this sector is taxed here, where its economic well being is generated. This will require a serious review of corporation tax rules. For individuals the definition of UK source income needs to be reviewed. Hiding behind offshore trusts and companies under the cover of the domicile rules whilst gutting the UK economy is not acceptable. Tax rules have to change to prevent this abuse.
Only if that change happens will businesses that generate real wellbeing compete with those who benefit from destroying it. Because that's what asset stripping does and since the days of Slater Walker that's the activity that private equity style enterprises have pursued. It was sordid then. It's sordid now, and it has to be taxed appropriately to compensate for the damage it causes.
None of which diminishes my commitment to venture capital. But right now genuine venture capital seems so far removed from private equity that it will need resuscitation in a new form and in a different tax and corporate structure before it can play a truly useful role in the economy again.