Reuters: Private Equity: Swedish govt forced to shelve private equity tax plan

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Swedish govt forced to shelve private equity tax plan May 9th 2012, 16:08 STOCKHOLM | Wed May 9, 2012 12:08pm EDT STOCKHOLM May 9 (Reuters) - Sweden's minority centre-right government has shelved a plan to tighten tax rules for private equity fund owners after the opposition blocked the proposals as too soft on the super rich. Sweden has Europe's second-biggest private equity industry relative to its gross domestic product (GDP) at 250 billion crowns ($36 billion), making up some 7 percent of the economy. Private equity firms such as Nordic Capital, EQT and Triton have been some of Europe's most active players. In Sweden, private equity firms are major players in running healthcare and education facilities which are tax-funded. The government's proposal planned to tax the first 5 million crowns ($728,800) of money earned by private equity fund owners, so-called carried interest, at regular income tax rates, and the rest at the lower capital gains level. "The proposal is in the ice box and I see no need to open the box in the foreseeable future," Finance Minister Anders Borg told journalists. Given the government is a minority administration, it needs opposition support for its legislative proposals. That was not forthcoming. "It was way too favourable and would have meant a tax break for the absolutely richest venture capitalists," said Fredrik Olovsson, leader of the main opposition Social Democratic party on parliament's financial committee. The proposal also ran counter to the opinion of the tax authority, which had held that all the proceeds should be taxed as income and that the government plan would have meant a fall in tax revenues compared to current legislation. Olovsson said the government, ruling as a minority cabinet since the 2010 elections, needed to come back with a better proposal rather than just shelve the issue. The government has also proposed to tighten up rules for how private equity companies get tax deductions for loans. Its initiatives against the private equity industry came after an outcry about the treatment of elderly people at a care home run by a company owned by a private equity firm. The move against carried interest targets arrangements which typically entitle private equity partners to a share of profits from a fund. In much of Europe, carried interest is treated as capital gains and is subject to lower tax rates than wages. Last year local media reported that tax authorities had landed the founder of private equity firm IK Investment Partners with a bill of almost 1 billion crowns ($149.7 million). ($1=6.8606 Swedish crowns) (Reporting by Johan Sennero and Love Liman; Editing by Mike Nesbit) Link this Share this Digg this Email Reprints

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