Wednesday, June 06, 2007

Private Equity and Tax

John Christensen was asked recently how TJN judges its success. He replied that he likes to measure it in terms of how TJN's concerns and issues become the mainstream perceptions of others. As the last few blog posts highlight, this is happening, in a big way. For starters, traffic in recent months to Richard Murphy's Tax Blog, also flagged on the TJN web site (above this blog), has been surging. Material backing TJN’s positions is appearing constantly in high-level media across the political spectrum from left to right. Currently, the message is resonating especially loudly in the United Kingdom. On June 3 the Financial Times carried on its front page an interview with Nicolas Ferguson, who built what is now Europe’s biggest private equity company. The FT said that Ferguson has "broken the sector's taboo on tax." Here is an excerpt from what he said:

“Any common sense person would say that a highly-paid private equity executive paying less tax than a cleaning lady or other low-paid workers, that can’t be right. . . I have not heard anyone give a clear explanation of why it is justified.”

Polly Toynbee responded to this article in her latest comment piece in the Guardian newspaper: Gordon Brown, she said, “will be asked why, as in most other countries, private equity cannot be made more accountable, why it shouldn't post bonds to protect pensions and, above all, pay taxes like everyone else?” Quite right Polly. The next day, the FT published chancellor Gordon Brown's response, in another front page story, with the tantalising headline: "Chancellor pledges justice on tax rates." Brown pledged, in relation to private equity and in response to Ferguson's remarks, to "make sure there is justice and equity in the treatment of tax arrangements in that area." As the FT story outlines, Brown looks like he is starting to act too. Paul Kenny, general secretary of the GMB union, drew his own conclusions from Brown's comments: "the fat cats are losing the argument on tax, and it was very noticeable that he (Brown) did not leap to the defence of the industry which he has done before."

From a different perspective, the poverty campaigners War on Want are building their own campaign on tax dodging. Tax, they say, is a key weapon in the fight against poverty, adding that "the UK is a major part of the global problem of corporate tax dodging. We believe it should be part of the solution." Quite right too.

All this looks rather like tax justice, catching on fast.

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