Private equity firms will seek to mitigate losses from mooted tax increases through restructuring programmes, Bloomberg reports.
Moves are currently afoot in congress to raise taxes on private equity managers from 15 per cent to 35 per cent in response to controversy over the high returns enjoyed by the sector.
The moves are intended to fund tax cuts for the American middle class. However, according to a mathematical study of the sector conducted by Michael Knoll of the University of Pennsylvania, the firms involved will undertake restructuring measures to shift costs to the companies in their portfolios.
“Transactional structures are likely to change in response as tax rules change,” says Knoll. “Those changes are likely to reduce additional tax revenues.”