Study On Perfecting The Tax Allowance Legal System Of Venture Capital In China

As the engine of the high-tech industry, venture capital plays a great role in the industrializing of high technology and the adjusting of economic structure. Developing venture capital is an important measure to ensure stable growth of the national economy. The developed level of venture capital decides the high-tech industry and national economics directly.Venture capital has the features of high risk, high input, and the technological research and development has some externalities. The support from the good legal system, including finance, tax, government procurement, intellectual property protection, is essential to the prosperity of venture capital. To promote national venture capital activities, many developed countries formulated a series of tax allowance regulations. Tax allowance may decrease the risk of investments and increase the profit of investors. Being important in the whole process of venture capital activity, tax allowance, as a tool, was used to promote and guide the development of venture capital industry in recent years.Venture capital in China has developed for about twenty years, but compared to the developed countries, it's still in the beginning stage. Due to some unsolved problems in venture capital development, the status quo of venture capital in China is not ideal. Chinese venture capital lacks strong support of legal system, specially the tax allowance regulations. Studying the successful experience and perfecting the tax allowance legal system of venture capital in China, is a significant article to us.This thesis takes the venture capital tax allowance policy as a legal system, analysis the concept and features of venture capital, notes the necessity and feasibility of the tax allowance legal system to promote the venture capital industry. By drawing advanced lessons from tax allowance regulations and by analyzing the current situation and problems in china, this thesis puts forward to perfect the tax allowance legal system of the venture capital industry from the view of legislation and institution.This thesis can be divided into five parts:The first section is a foreword. Through presenting research objectives, background and related research results, it introduced the main research content and direction, and emphasized on the theoretical and practical significance of the tax allowance legal system of venture capital.Part 1 is the theoretical analysis on the tax allowance legal system of venture capital. It discussed the necessity and feasibility of the tax law support to venture capital industry. Firstly, from an economic point of view, due to its own features of high risk, high input and the positive external effects of technological research and development, venture capital needs the government support. Tax allowance can decrease the risk of investments, increase the profit of investors and finally encourage the venture capital investment. Then, from the law view, in terms of the three basic principles of tax law, the thesis emphasized on the legislation of the tax allowance policy to provide a fair compepition envioronment for venture capital. Secondly, by analyzing the impact of the tax law and the"self-liquidating"effect of the taxation, the thesis demonstrated the tax incentive measure is feasible. So our country should establish the tax allowance legal system as soon as possible.Part 2 gives an overview of the tax incentive regulations of other countries, such as the America, England, South Korea and India. From these successful experiences, we can draw some lessons to benefit the establishment of tax allowance legal system of venture capital in China. These experiences include: 1. Focus on the legislation. Tax incentive policies in the form of law will have greater authority and stability. 2. Formulate specific tax allowance in light of their own national conditions, such as raising the level of national venture capital investment, mobilizing the enthusiasm of private investment, focusing on venture investors and the cultivation of entrepreneurship. 3. Attention to the whole venture capital industry, use the direct and indirect measures to give the overall incentive. 4. Try to eliminate the double taxation in venture capital.Part 3 takes a brief review of the development history of China's venture capital industry and the current status quo of the related tax law. incentive policy. As an industry, venture capital is made up of three main participants, that is venture investor, venture capital institution and venture enterprise. From this perspective, the thesis points out some shortages in the tax allowance system which constrained the development of our venture capital industry. There are no complete tax allowance legal system. The tax incentive goal is not clearly defined and the support role of tax law is not satisfactory. There are no especial tax incentive policies to encourage the venture investor and the venture capital company, the policies for venture enterprises are need to perfect, and the problem of double taxation is unsolved.Part 4 puts forward the perfection of the tax allowance legal system of venture capital in our country from the view of legislation and institution. It's the core of the whole thesis. Firstly, the text proposed the basic principles which the venture capital tax allowance legal system design should be followed, including: 1. General principle. The legal system should focus on systemic and integrity of the whole venture capital industry. 2. Appropriate principle. Tax allowance has its own limitations, so we should just take it for appropriate control. 3. Combinative principle. We should pay attention to the coordination of the tax allowance and other basic legal system. Secondly, it gives some specific suggestions to perfect the tax allowance legal system. We should legislate some basic laws ahout venture capital to provide a good external environment for this industry and focus on the indirect incentive measures. Then from the perspective of the main entities involved in venture capital, different legislation advices in tax allowance are given, such as, strengthen the tax incentives for venture investors to increase the effective supply of venture capital; focus on the tax law support for venture capital institutions to resolve the double taxation; perfect the tax allowance for venture enterprises to improve their capability of independent innovation. Meanwhile, the tax allowance for entrepreneur and technical staff should be enhanced either.