British Politician Calls Hedge Fund Tax Loopholes ‘Grotesque’

Sep 15 2008 | 8:49am ET

Growing hedge fund unrest about British tax policy is not stopping the leader of that country’s third political party from promising to end the “grotesque spectacle” of hedge fund managers coughing up less than blue-collar workers.

Nick Clegg, who leads the Liberal Democrats, said his party’s platform would include the closing of two tax loopholes that could cost the rich, including London’s hedge fund community, £12 billion (US$21.5 million). He is expected to make the proposal at the party’s annual conference this week.

“We are not being punitive to anyone,” Clegg said on BBC television. “We are simply saying that we need a fair, simple, transparent tax system where everyone pays their fair share, and it shouldn’t just be the rich who enjoy these great, big multi-billion pound loopholes in the system.”

The position of the Lib Dems, who currently boast 63 members in the 646-member House of Commons, could be crucial if the next British election, due by 2010, fails to produce a majority for either of the country’s major parties, the governing Labour Party or the opposition Conservatives. In the case of a so-called “hung parliament,” the Lib Dems could be kingmakers, able to extract concessions in exchange for supporting one party or the other.

That possibility is likely to cause even more tax anxiety in the City. Earlier this month, London-based Krom River Partners decided to move its headquarters to Switzerland, just as Swiss authorities announced plans to make their country more hedge fund-friendly with simpler—and lower—taxes.


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