The U.K.'s new Chancellor of the Exchequer Alistair Darling has ruled out an immediate clampdown on tax privileges enjoyed by the private equity industry in an interview with the Financial Times newspaper.
He said that any sudden changes may have undesirable effects on the "absolutely critical" role played by the City of London in the U.K. economy.
Darling said he would "always strive in making changes to try and make the tax system simpler" but would not make quick changes to capital gains tax or the taxation of individuals not domiciled in the UK even if it would gain him favourable headlines.
"I think we should be very, very wary indeed of a knee-jerk reaction to a day's headlines into making a tax change that could result in unintended consequences and undesirable consequences," he told the newspaper.
Private equity investors have come under fire in recent weeks as it became clear that they can pay less tax than their cleaners, as the taper relief system allows investors to pay just 10 pct capital gains tax on earnings they receive through selling their stakes, provided they have held them for at least two years.
Elsewhere in the interview, Darling said that sweeping changes to US corporate governance legislation, introduced in the aftermath of the Enron collapse, showed the dangers of over-reaction in all areas of financial policy. "They're now looking at how they can get out of it. There's no doubt it has damaged the US market," he said. "When or if we make any changes they must be made at the proper time in the context of the Budget or the pre-Budget report and in the context of making tax reform which will beneficial to the country."