Private equity firms are willing to pay more tax but they are still not prepared to pay as much as their cleaners.

Peter Taylor, managing partner in Duke Street Capital, a mid-market buyout firm, told MPs yesterday that he believed that a tax rate of 15 to 20 per cent would not be a “material disincentive” and would help to simplify the existing complicated rules.

“I think it’s internationally competitive and equitable,” he said.

His comments echoed similar remarks by high-profile practitioners such as Nicholas Ferguson, of SVG Capital, and Sir Ronald Cohen, who in recent months have questioned tax breaks that allow buyout partners to pay as little as 10 per cent tax, or less.

Mr Taylor’s comments to MPs at a third session of the Commons Treasury Select Committee’s inquiry on private equity came as Alistair Darling, the new Chancellor, signalled that there would be no rush to action by the Treasury to impose any tax crackdown on private equity.

In his first press interview since succeeding Gordon Brown, Mr Darling sounded a warning against any “knee-jerk reaction” to the private equity controversy that might lead to “unintended consequences and undesirable consequences”.

He noted how the City had benefited from the unintended impact on American business of the Sarbanes-Oxley corporate governance laws in the US, which are now seen as over- reaction to Enron and similar cases.

Jon Moulton, the head of Alchemy Partners, told MPs on the select committee that the industry would benefit from a simplification of the “hideously complicated” tax laws, although he stopped short of backing higher taxes. “You’re seeing this far too simply,” he told the MPs, pointing out that he could pay anywhere between zero and 40 per cent taxes. “The risk level is enormously variable,” he said.

“You keep saying we are giving you a low tax rate. You should, perhaps, be looking at it the other way around. You are getting some tax. If you’re not careful, you might not get any.”

Asked what would be the industry’s reaction if taxes were to be increased, Donald MacKenzie, the head of CVC Capital in London, said that there would be “a lot of sad faces, I’m sure of that”.

Yesterday’s hearing is expected to be the final session before the MPs report back to Parliament with their recommendations.

Although tax was high on the agenda, so, too, was unease in the debt markets, given the delay or cancellation of several big deals linked to buyouts, such as US Foodservice.

David Blitzer, senior managing partner in Blackstone, said: “I don’t believe there is excess leverage in the system. We stress test every one of our investments for recession and spend months on due diligence.’’

Mr Moulton, however, said that the pulling of deals was a clear sign of the top of the market. “At some stage there will be no one willing to underwrite fresh debt,” he said.

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