Tax breaks enjoyed by private equity firms have become an embarrassment. Last week’s disclosure by a senior industry figure that some of the wealthiest executives in the UK pay a lower rate of tax than a cleaner has sparked unease across the political spectrum.

But the treatment of the British private equity industry is merely one example of a broader problem with tax policy in the UK and many other industrialised countries. Some experts have long suspected that using the tax system to encourage entrepreneurs and investment in growing business has a tendency to backfire.