June 21, 2007 (LPAC)—In London the "big players" in private equity operations had to testify to the Parliament's Treasury Select Committee yesterday, as the incoming government of Gordon Brown faces increasing pressure to close the huge tax loopholes exploited by the super-rich speculators -- although of course it was Chancellor Brown who has overseen the creation of the British "tax haven" in the first place. Four senior private equity executives, including Robert Easton of Carlyle Group, Dominic Murphy of Kohlberg Kravis Roberts, Damon Buffini of Permira, and Philip Yea of 3i, all went before the committee. These hearings in London parallel discussions which LPAC has reported from Washington. Also, just before the committee hearings, private equity baron Sir Ronald Cohen warned that there could be riots in the streets, as in Paris, if the growing wealth gap is not closed. Cohen is a big funder of Gordon Brown.

Labour MP John McFall, said to the speculators: "You're the masters of the universe. I'm asking how much capital gains tax you pay and you cannot tell me?" Under the current tax policy, the CEO's personal profits from takeovers are taxed at capital gains' rates of as little as 5%-10%, instead of 40% income tax. Since 2003 they only need to keep their investments for two years before they can cash them in and benefit from the tax break.

Unions in Britain have put on a lot of pressure about the private equity groups. The spokesman of Unite Jack Dromey said more was known about the Cosa Nostra than private equity before the unions campaigned to expose its activities, the Guardian reported. Even outgoing PM Tony Blair had to admit that there are "legitimate concerns" about the low taxes paid. Last week, the head of the British Private Equity and Venture Capital Association had to resign after failed attempts to defend the current tax situation to the Treasury Committee. In 2003, a Memorandum of Understanding was exchanged between the private equity "industry" and H.M. Revenue & Customs (HMRC), allowing the funds to set up offshore "collective vehicles" for investment gains, which are subject only to capital gains tax.

Yesterday, the Evening Standard published an estimate that the tax loopholes mean that Britain is losing some 6 billion pounds a year in taxes, due to breaks for the super-rich.