Promoting Informal Venture Capital: III Tax Incentives
Informal venture capital can also be encouraged through taxation. Tax incentives have a number of attractions as a means of encouraging informal venture capital (Table 15.1). One advantage is that they benefit all investors. Whereas better information flow will not influence the investment activity of those investors who are not willing to look for investment opportunities outside of their own network of friends and associates, tax-related incentives may encourage these investors to make more investments within their contact network. Tax incentives will also inevitably attract the attention of the media which will, in turn, increase public interest of the potential for making informal venture capital investments. Tax incentives would also be a reason for investment advisers and accountants to tell their clients about venture capital investment. The evidence of the Business Expansion Scheme in the UK indicates that tax incentives can have a significant impact on the volume of informal venture capital investment activity (Mason, Harrison and Harrison, 1988).
KeywordsVenture Capital Capital Gain Equity Investment Investee Company Venture Capital Investment
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End Notes to Chapter 15
- 1.This was increased to 18% from the beginning of 1997.Google Scholar