Taxing times (Editor's Letter)

If you like taxes, you're going to love this issue of PEI Manager.

If you don't like taxes, you're going to want to read it anyway – we present in this issue a lineup of impressive experts to give you details that will likely save you and your investors money.

Taxes and private equity have always had an uneasy relationship, but the dangers for GPs that sprang up two years ago have been replaced by more complicated, murkier risks. GPs may even feel some nostalgia for the Great Debate over the taxation of carried interest, when lawmakers on both sides of the Atlantic hungrily eyed record carried-interest payouts as tax revenue opportunities. Carried interest is now largely a nonentity, and tax authorities have many more issues to deal with beyond private equity.

The wandering political spotlight has meant that private equity may go from main character to bit player in a broader tax drama, but this is no less dangerous for the private equity industry, which now faces even further uncertainty in its future tax position.

As you'll learn in this issue of PEI Manager, it's not all bad news on the tax front. Kevin Ley writes, it may be premature for US general partners to try to anticipate any Obama policies in their partnership documents. What's more, certain proposed loss write-off policies may help portfolio companies (although this is not unique to private equity).

We are pleased to also present an analysis of hot tax topics across Europe, written by PricewaterhouseCoopers. The EVCA in particular has been fighting hard to remind European legislators that private equity plays an important role in building and strengthening business, and if lawmakers want more of this they need to see that taxes do not impede GPs.

When returns get compressed, every ounce of profit counts, and it is therefore crucial that the managers of private equity firms not suffer tax friction through avoidable structuring errors. We hope the expert advice you get in this issue helps you maximise profits for your investors and your partners.

Best regards,

David Snow