Private equity's inner circle refuse to declare they are UK taxpayers

Private equity's inner circle refuse to declare they are UK taxpayers

The main players in the fast-growing world of private equity are refusing to disclose where they pay tax in the face of mounting criticism of the generous tax treatment of some of their activities.

The Guardian yesterday asked where 22 leading figures in the private equity business were domiciled for tax purposes. Only one, Phil Yea, chief executive of 3i, would confirm he was a UK tax payer.

Sir Ronald Cohen, a grandee of the business who has called for the big private equity funds to pay more tax, refused to disclose his personal tax status. Sources close to the former boss of Apax, who now specialises in social investment and is an adviser to Gordon Brown, insisted Sir Ronald "pays a large amount of tax within the UK to the UK". But a spokesman refused to say whether he was domiciled in the UK for tax purposes.

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The Treasury select committee is expected to raise the issue of tax domicile when it questions the heads of five major private equity firms next week. The select committee started its investigation this week and has already claimed the scalp of Peter Linthwaite, chief executive of the industry lobby group the BVCA. His departure, after two years in the job, followed a revolt by BVCA's powerful private equity members who were unhappy with his failure to fend off the rising tide of criticism from politicians and trade unions about pay and the treatment of employees in the companies they acquire.

The executives summoned by the select committee are Damon Buffini of Permira; Dominic Murphy, the KKR boss who has just masterminded the takeover of Alliance Boots; Blackstone's David Blitzer; Robert Easton of Carlyle; and Mr Yea. They are now likely to face questions in public about their personal tax status for the first time and will find it very difficult to dodge the issue in the face of persistent questioning by committee chairman John McFall and his fellow members.

When asked by the Guardian yesterday, the 22 executives at seven private equity groups tended to cite personal privacy for not disclosing where they pay tax. They are not obliged to do so.

Seven senior executives at Blackstone, including Mr Blitzer, declined to comment. Philippe Costeletos, head of Texas Pacific Group Europe, could not be reached, while Mr Murphy of KKR failed to return calls.

A spokesman for CVC, based in Switzerland, declined to comment on the status of four of its top deal-makers, as did a spokesman for six top executives at Apax, the private equity house founded by Sir Ronald and now run by Martin Halusa.

Carlyle pointed out that Robert Easton, who is among those appearing before the committee, is an adviser to the firm rather than on the payroll.

The issue of the tax paid by private equity executives was highlighted by Nicholas Ferguson, chairman of SVG Capital and one of the main backers of Permira. He criticised tax rules that allowed buyout executives to pay just 10% tax and pointed out that this was less than a cleaner paid.

Yesterday, Sir Ronald, regarded as one of the founding fathers of the private equity industry, said the low rates of tax should remain for those backing small, high-risk start-up ventures. But the "mega funds" such as Permira, Blackstone and KKR, should be under a different regime.

"We need to look again in an involved way at whether the incentives need to be as great for the larger funds as they are today," he told the Financial Times.

The argument is that there is much less risk in buying Alliance Boots, the biggest private equity Europe deal in Europe, than in pouring funds into a start-up.

Sir Ronald runs Bridge Ventures, which has just raised £75m to invest in businesses operating in deprived areas.

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