Private Equity hit in US and the Netherlands for tax issues

In the US, House Ways and Means Chairman announced his plans to raise taxes on investment income those money managers take home each year. He included a nearly $31 billion tax increase on these investment managers in his broader measure to save middle-income families from the alternative minimum tax for another year. His proposal would force these highly paid money managers to record much of their revenue as labor - instead of the return on an investment - requiring them to pay significantly higher tax rates on that income each year.
Other revenue generators in that broader proposal include a prohbition on certain offshore tax shelters and a requirement for any company that processes credit or debit card payments to file revenue reports with the Internal Revenue Service. This latter requirement would force many businesses to report their earnings more accurately to the IRS.

Meanwhile, in the Netherlands, Private equity investors are threatening to leave the country due to a proposed law that could raise the tax they pay on investments to as much as 52 percent from 1.2 percent currently.

The Dutch government proposed law aims to raise taxes on excessive management pay after a public outcry at multi-million windfalls on stocks and bonuses of executives. The law also impacts some private equity investors.

The government says it wants to clarify taxation rules on "carried interest" rewards, which are returns on shares or other stakes in a company and are linked to a manager's work.

The Dutch association of private equity companies, NVP, said the measure was unfair as it would also tax historical value increases of investments that had not yet materialised. "We have received several notices that some managers are considering ending their seed funds. This would destroy a successful element of the government's innovation policy," the NVP said.