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The Shadow Chancellor, George Osborne, has said he would raise tax for private equity but has said his tax planning measures would take the sting out of the current debate.
He told the Times: "Gordon Brown may be happy to stay silent on these things, but I think we need to do what we can to reward proper risk-taking and draw the sting out of this whole debate by ensuring that what looks like income is taxed as income."
It is believed that Gordon Brown is looking to close the loophole that currently exists in the tax planning legislation whereby super-partners can pay less than a ten per cent tax rate.
The company formation has its interest taxed as capital gains, which means it is subject to taper relief as opposed to income.
Mr Osborne argued that it seemed the debate had become more of a "campaign to drive private equity out".
He added: "Im worried that the witch hunt against private equity is going to push the industry offshore and do further damage to our whole culture of entrepreneurship.
"Its good for the economy for it to be based in London, not somewhere in Geneva."
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