The hedge fund and private equity industries contribute EUR9bn (GBP7.9bn) in tax revenues to European Union governments, according to a survey by independent think tank Open Europe.
Open Europe said the EUR9b tax contribution would be enough to fund the EU’s entire overseas aid budget for 12 years. The tax contribution also matches the value of the EU’s Cohesion and Aid Programmes for Poland and is just short of the subsidy that France receives each year under the EU’s Common Agricultural Policy, according to Open Europe.
“Alternative investment fund managers provide investments and create growth, jobs and more efficient markets across Europe,” the report says.
The survey also found that the UK hedge fund and private equity industries contribute about EUR6.1bn (GBP5.3bn) in tax revenues to HMRC. Open Europe said this would be enough to pay for more than 200,000 nurses, 45,000 hospital consultants or 165,000 teachers. In just two years, the tax revenues generated by alternative investment fund managers would be able to pay for the entire 2012 London Olympics, according to Open Europe. But if the tax revenues were to disappear, Open Europe said it would take a 20 per cent increase in council tax in order to make up the shortfall.
The European Commission’s Alternative Investment Fund Managers directive would cost the hedge fund and private equity industries in the EU between EUR1.3bn and EUR1.9bn (GBP1.2bn and GBP1.6bn) in its first year, if implemented in its current form. The annual recurring cost would be between EUR689m and EUR985m (GBP597m and GBP853m). Respondents said their total compliance costs would increase by almost one-third on average.
Although the AIFM directive is designed to give better protection for investors, just two per cent of alternative investment fund managers’ clients favour it, while 46 per cent oppose it.
There is evidence that the draft directive is already hampering the growth of the industry, with eight per cent of respondents revealing that they had delayed a launch of a fund because of the proposal. In addition, 83 per cent of managers thought it would be more difficult to start up a new fund if the directive were implemented in its current form.
The report says: “Our surveys show that unless a range of amendments take place, the AIFM directive will impose substantial costs across the board, without offering sufficient benefits for the industry, investors and the wider economy… In a worst-case scenario, thousands of jobs and millions in tax revenues could be at stake.”
Andrew Baker, Aima’s chief executive officer, says: “We were delighted to work with Open Europe on their survey of alternative investment fund managers in Europe. Their findings prove that our industry makes a strong and tangible contribution to the economies of Europe.”