LONDON (Reuters) — Four top private equity bosses yesterday embraced a simpler UK tax regime amid broad criticism of the industry that has focused on their personal tax rates, which can fall under 10 percent.One of them even said during questioning by legislators that raising the tax rate on private equity executives would probably not have a harmful effect.

"I don't think a rate of 15 or 20 percent would be a material disincentive to entrepreneurs like ourselves to create value over the long term," said Peter Taylor, managing partner at Duke Street Capital.

Private equity firms have been pushed begrudgingly into the spotlight this year as they buy ever-larger household names such as pharmacy chain owner Alliance Boots.

Trade unions and some politicians have levelled criticism at the industry, saying the partners reap millions of pounds from deals without taking on real risk or paying their fair share of taxes.

The executives faced about 90 minutes of questioning on Tuesday by a Treasury committee collecting evidence ahead of a report on the industry. It was the third such meeting, and the tone was considerably less fiery than in previous sessions.

There was nevertheless some heated back-and-forth about abuse of the tax system.

Jon Moulton, the outspoken managing partner of buyout firm Alchemy, said some executives were scheming to move cash offshore to lower their tax bills. "In some cases people are abusing what is already a generous tax regime."

He argued for a broad revamp of the tax system, which he called "horrendously complicated".

Moulton warned the committee, however, that any radical changes to the detriment of private equity firms could reduce the revenue raised by the UK government.

"You keep saying, 'We are giving you a low tax rate'," he said. "You should perhaps be looking at it the other way around: you are getting some tax. If you're not careful, you might not."

Most of the controversy centres on tax relief from the so-called carried interest earned by private equity partners on their investments. It is treated as capital gains and entitled to taper relief, which often reduces the rate to 10 percent and lower compared with the 40 percent rate on income.

Asked what would happen if the document providing that relief were to be torn up, CVC Capital Partners managing partner Donald Mackenzie said: "There would be a lot of sad faces."

The industry is facing criticism at the same time that it is starting to see tougher conditions in raising capital, and some debt financing deals have collapsed in recent weeks.

Blackstone Group senior managing director David Blitzer said he expects a similar number of buyouts in the coming years but the size of the deals, which have been growing, to stabilise.

The industry has taken steps to tackle its reputation for secrecy and excess by appointing former Morgan Stanley International chairman David Walker to lead a group to develop self-regulatory guidelines.

Walker told the committee that legislation should be a last resort if firms fail to comply with the industry's own recommendations.

"I am doubtful of the need for black-letter sanctions," he told the committee. "I don't see a place for regulation or primary legislation in this space."

He said the industry's guidelines would recommend, for example, that reports and accounts be published online four months after a company's year-end -- well ahead of the nine-month legal obligation. Reports would also include some disclosure on managers in funds, though not limited partners.