Venture Capital Tax Policy Research

Venture capital is a kind of special investment in intellectual economy age. It offers equity capital to high-growth venture enterprises which are mainly science and technology ones, provides management and consultant service for venture enterprises in order to acquire mid-term and long-term capital gains by transferring stock after venture enterprises grow up. Venture capital is an organism which is made up of venture investors, venture capital firms and venture enterprises. It has characteristics which are different from common investment and financing. Venture capital plays a great role in pushing forward with high and new-technology industrialization, promoting economic structure adjustment, promoting technology improvement and creating employment opportunities.Tax is not only the primary most revenue of government but also the policy instruments mostly used by government to macro regulate the economy. The modern western tax theory indicates that tax has an important effect on venture capital. Appropriate tax privilege can reduce venture capital cost and raise expected gains. The practice of venture capital development also indicates that tax policy can embody governmental policy intention of supporting venture capital and that tax policy is an effective instrument of promoting the development of venture capital.Venture capital in China started with its development in the midterm of 80's in the 20th century. After almost twenty years, venture capital has possessed preliminary scale, but is still in start stage totally. Due to some unsolved problems in venture capital development, the status quo of venture capital in China is not ideal. The imperfection of tax policy is one of the factors that restrict the development of venture capital in China. Venture capital lacks strong support of tax policy. So the research of practical and strong-operative tax policy on venture capital is the main way to solve such problem.In the light of the problems in present tax policy on venture capital, based on the analysis of the effect that tax has on venture capital and combined with the basictheory of venture capital, this paper puts forward tax policy propositions on venture capital. This paper consists of four parts:The first part starts with the summarization of venture capital, analyzes characteristics of venture capital by defining it and expounds on operation mechanism and function of venture capital fatherly.According to the research fruits of Canadian economist Boadway, the second part simply analyzes the effect that income tax and capital gain tax have on venture capital by two-period partial-equilibrium model and draws a conclusion that the effect tax has on venture capital decision mainly depends on how tax policy manipulates venture capital loss. Only venture investors are given full loss offset can their investment gains be raised and their investment risk be reduced so that the goal of encouraging venture capital can be achieved.The third part starts with the status quo and problems of venture capital development in China, introduces contents about tax policy on venture capital from the point of venture investors, venture capital firms, and venture enterprises and analyzes the problems of tax policy on venture capital.Based on the problems of tax policy on venture capital, the fourth part puts forward tax policy promoting the development of venture capital in China. The tax policy includes policy target, basic principles and concrete measures.