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Effectiveness of tax incentives for venture capital and business angels to foster the investment of SMEs and start-ups

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  • Institute for Advanced Studies (IHS)

Abstract

The Capital Markets Union project (CMU) aims to strengthen the single market by deepening the integration of investment across the European Union. Improved access to finance is a key component of this project, in particular for start-ups, SMEs, and young companies with innovative growth plans. Historically, European SMEs have been primarily dependent on bank finance. In the wake of the financial crisis, this source of funding has been restricted by refinancing capacity, risk appetite and capital adequacy of the banking sector. This has forced young, growing and innovative businesses to seek finance from different sources, such as venture capital (VC) and business angels (BA).This study investigates the part that tax incentives for can play in fostering VC and BA investment, with the intention of promoting best practice across Member States.

Suggested Citation

  • Institute for Advanced Studies (IHS), 2017. "Effectiveness of tax incentives for venture capital and business angels to foster the investment of SMEs and start-ups," Taxation Papers 68, Directorate General Taxation and Customs Union, European Commission.
    • Handle: RePEc:tax:taxpap:0068
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    File URL: https://ec.europa.eu/taxation_customs/sites/taxation/files/taxation_paper_69_vc-ba.pdf
    File Function: final version, 2017
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    More about this item

    Keywords

    SME; tax incentives; venture capital; business angels;
    All these keywords.

    JEL classification:

    • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage
    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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