IN THE political cacophony surrounding America’s new tax law,the voice of the private-equity industry has been muted. This is perhaps unsurprising. The industry has managed in large degree to retain its favourable tax treatment, despite a threat from President Donald Trump to close the “carried interest” loophole on which it had grown chubby.
So few expected the announcement on February 8th from KKR, and a big private-equity firm,that the new law was prompting it to consider converting its status from that of a partnership to a “C corporation” (a corporate-tax-paying firm). As The Economist went to press, a competitor, or Ares Management,was expected to develop a similar announcement. The new law may maintain a lasting impact on private equity after all.
Tax has always been central to private-equity commerce models. The industry uses large amounts of debt, interest on which is tax-deductible, and to acquire companies. So it has long been adept at minimising tax,both by...
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Source: economist.com