EUrules on hedge funds will hit taxes

THE HEDGE fund and private equity industries yesterday welcomed a survey that said they pump &euro;9bn (&pound;7.9bn) a year into the tax coffers of European Union (EU) governments. <br /><br />The survey also says that a proposed EU directive &ndash; which seeks to regulate alternative funds over &euro;100m in size with an iron fist &ndash; would cause serious damage to EU economies.<br /><br />Simon Walker, chief executive of the private equity body BVCA, said: &ldquo;What we cannot accept is disproportionate regulation which would damage the operation of an industry which has not been identified as systemically dangerous or a cause of the financial crisis. <br /><br />&ldquo;This research reveals in stark terms that the directive as currently drafted would be deeply damaging to economies across Europe.&rdquo;<br /><br />Andrew Baker, chief executive of hedge fund body AIMA, said:&ldquo;The findings prove that our industry makes a strong and tangible contribution to the economies of Europe&rdquo;.<br /><br />The survey also found that tax contributions from the hedge fund and private equity sectors are big enough to pay the entire EU overseas aid budget for 12 years. <br /><br />And they are almost enough to cover France&rsquo;s annual payout under the Common Agricultural Policy.<br /><br />The UK government gets &pound;5.3bn in tax revenues from the industries each year. In just two years, this could cover the entire cost of the London 2012 Olympics, according to the report.<br /><br />The report, by think-tank Open Europe, said: &ldquo;In a worst-case scenario, thousands of jobs and millions in tax revenues could be at stake.&rdquo;<br /><br />In the first year, the directive would cost the asset managers Europewide between &euro;1.3bn and &euro;1.9bn, the report claims, falling to an annual cost of as much as &euro;985m, which would be passed on to investors.<br /><br />And the survey claims the draft directive is already hampering the hedge fund industry. Eight per cent of respondents have already delayed launching a fund amid fears over the new rules, it said. <br />