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Optimization of Tax Policy of Venture Capital in China

Author: LuHuiYing
Tutor: ZhangHuiYing
School: Southwestern University of Finance and Economics
Course: Taxation
Keywords: Venture Capital Independent innovation Tax
CLC: F812.42
Type: Master's thesis
Year: 2008
Downloads: 232
Quote: 1
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Abstract

Venture capitals began after World War II. Since then, it had a profound impact on globe economy and the economy of the United States. In the creation of employment opportunities, innovation of products and services and dissemination of the entrepreneurial spirit, and some other fields, the contribution of venture capitals is impressive. Many of the world’s developed countries, in order to promote its own venture capital industry, developed a series of preferential taxation policies. To some extent tax incentives can reduce the proceeds risk of investors, also can enlarge the investors’yield, and the venture capital industry has an important impact on the whole input-output process, therefore gradually many governments promote and guide the development of the venture capital industry as an important tool.Venture capital promotes the development of high-tech industries as the major force. Therefore, the venture capital industry will have a direct impact on the development of high-tech industries, on the national economy as well as other industries. Its development also expands the tax base, rationalizes the structural adjustment of the tax, and increases the taxation as well.The general concept of the dissertation is that by analyzing venture capital and tax policy options, it comes to a conclusion that: tax policy is the basic approach of government served as an important means of investment promotion, it has positive incentives. And then, on the basis of summing up the international venture capital experience and advanced tax policies, this dissertation analyzes the current Chinese tax policies problems for venture capitals. Finally, it starts to explore approaches to optimize tax policy of venture capital.This dissertation is divided into five parts totally. The first part introduces briefly the background paper topics, research significance of literature and research methods. Venture capital is the link between technological innovation and economic growth. In order to seek sustained and rapid economic growth, to develop Venture capital is very important. The author of the comprehensive research results from some academics articles pointed out that tax policy questions of Chinese venture investment are focused on two aspects: First, preferential tax policies for the main body of capital investment is unable to form a system; second, in light of the object venture capital, so-called high-tech enterprises, that production-based value-added tax, targeted income tax concessions and the lack of uniformity is constraining the development of high-tech enterprises. Accordingly, the domestic researchers of the venture capitals have also put forward a revised tax policy view that tax policy of venture capital need to form a complete system, avoiding duplication duty; the object of venture capital( high-tech enterprises) should speed up the pace to change on the value-added tax for the "consumer-oriented".The second part, this dissertation introduces the connotations of venture capital, and analyzes how tax impact on venture capital investments. First, the author combines Chinese and foreign economists on the definition of venture capital, concluded that venture capital is a special industrial chain, and it can be divided into two parts to look into. First, the main business, venture capitals, is the enterprises, social organizations and individuals, as they are the sponsor of venture capital; and then, venture capital’s object called invested enterprises, focused on a very high growth potential, is an industry that combine high-yield and high-risk. Venture capital’s object is often manifested in the form of high-tech enterprises. Second, it does the analysis of the tax in the role of venture capital. The author uses quasi-public goods and principle of technology overflow external to get a conclusion that a tax policy support on venture capital is necessary. Finally, the author points out that tax incentives for model of venture capital institutions will also have a certain impact.The third part, the comparison of the international venture capital policy. The author compares tax policies of venture capital of the United States, the United Kingdom and the Asian countries, and concluded national experiences and found that: First, the government’s attention to venture capital attaches great importance to the venture capitals, especially on legislation; second, concession is flexible; Third, the improvement for the system, the coordination of all sectors.The fourth part, this dissertation analyzes the current tax policies of venture capital. First of all, on Chinese domestic situation of the development of venture investment. Second, the author outlines current tax policies of venture capital in China, respectively on the main venture capital - the venture capitalists and venture capitalists object– so called invested enterprises. The author pointed out that there are many problems in current tax policies of venture capital, including poor tax policy of the venture capitalists and so on. Also ,there are various deficiencies of tax policies of the object for venture capital ,reflected in the non-systemic tax policy, tax incentives restrictive, and so on. Finally, the author expounded new trends of reform of tax policy for venture capital. Eight supporting the promulgation of a policy, which will readjust the economic structure, construct an innovation-oriented country and play a role as lights for optimization of tax policies of venture capital.The fifth part proposes countermeasures how to optimize tax policy of venture capital in china. First, a clear goal should be set to guide. I believe that short-term goal is: through tax preferential policies to encourage the flow of venture capital and talent to venture capital enterprises; tax incentive principle is that appropriate principles and industry concessions, supplemented by the principle of regional preferences. Secondly, we should focus on subject and object of venture capital, from upstream to downstream, and proposed how to optimize tax policy of venture capital in china comprehensively. The author believes: we should taxation policy of subject of venture capital through investment credit, relief the personal income tax of venture capitalists. Correspondingly ,we also have to consummate tax policy of object of Venture Capital, mainly from turnover tax and income tax aspects. Last but not least, the tax policy ought to reflect support for person with ability of venture capital. we recommend relief personal income tax of high-tech person that made by a special staff bonuses and allowances. In addition, the author also referred to other entrepreneurial investment measures, and noted that the development of venture investment is not only rely on tax policy, but also depends on financial input , financial support, talents and other aspects.Innovation points:In the past, ideas of optimization of tax policy of venture capital in china are only focusing on venture capitalists, or just focus on high-tech enterprises. The contribution of this paper is the author divide the venture capital into two parts: part 1, the main business - venture capitalists. It could be enterprises, social organizations and individuals, they are the sponsor of venture capital; part 2, venture capitalists object - investment enterprises. Venture capital always focus on high growth potential, high-yield and high-risk industries co-exist, so the object of venture capital manifested in the form of high-tech enterprises frequently. Correspondingly, optimization of tax policy of venture capital should be discussed in two part, from upstream to downstream . And then ,we make suggestions to them.

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CLC: > Economic > Fiscal, monetary > Finance, the state's financial > China's financial > Financial income and expenditure > Tax
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