Q&A: Altor's Krusell on Sweden's carried interest tax debate

To what extent has Altor been prepared for this?
We have been very prepared. Considering the advisory firm Altor Equity Partners has already been billed with additional taxes, it's only logical that individuals will also receive further tax bills as Skatteverket [the Swedish tax authority] views these proceeds as salaries. We see them as capital gains as the individuals have made investments in the fund.

This process applies only to the individuals involved and the proceeds they received from the 2008 fund; therefore, Altor as an advisory firm is not a defendant in this latest legal case.

Of the SEK 500m tax bill SEK 50m is a penalty tax for giving inaccurate information. Was this a fair penalty?
We haven't hidden any information from Skatteverket. Skatteverket deems it to be a faulty taxation assessment even though it's been approved by the authority throughout the years now in question, which makes the additional tax for giving incorrect information very strange. We have been incredibly open, and all proceeds awarded from the 2008 fund has been openly declared.

What's the next step for Altor?
First, Altor's advisory firm has appealed and has been granted a tax deferral. The individuals involved will now do precisely the same thing. The next big step is Nordic Capital's next hearing in its second court appearance at the end of November. That's the most important event concerning carried interest taxation during the autumn for us and all other Swedish private equity firms.

The dates of the court cases are entirely public information. As all Swedish private equity firms have followed the same financial legislation over the years, we have worked in accordance with the law.

How do you view the future of private equity in Sweden?
It's unfortunate that the debate today is centred so much around these sorts of issues. Historically, funds with investments in the Swedish and Nordic market have performed well, and we've had continued healthy returns on our three funds. Therefore it is a shame this debate is taking up so much space because we would prefer to focus on our main activity, which is buying and developing companies. Now, too much time has been spent on this. However, we believe this process will end and that the private equity companies involved will win in the next legal instance. Then we can continue to do what we are good at – building companies.

Do you think some sort of compromise could be reached?
It's difficult because the legal process happening at the moment will be judged at either a 55% income rate or a 25% capital gains rate and there is no middle way. Right now there's not much we can do other than wait. I understand what you mean; there could be a "third way", but there has never been a discussion around this. We could perhaps look differently at the issue from now onwards. The process is looking backwards and is not looking at any alternatives.

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