ATJ Asian Tax Journal

Asian Tax Journal

Print ISSN 1738-3323 Online ISSN 2733-9270

How to Improve the Government’s Proposal to Revise Tax Laws for Venture Investment

  • BYUNG WOOK JUN University of Seoul

Asian Tax Journal Vol. 24 No. 2 (2023), pp. 95-115

Abstract

The government’s proposal to revise tax laws for venture industries (“Government tax proposal” hereafter), issued on November 4, 2022, is not regarded as highly effective for the promotion of venture investment enough as the crowding out effect against current investment for venture industries is likely to be anticipated. Based on the analysis of this study, how to rationally revise tax laws for the policy goal is suggest as below. First, regarding both tax credit for corporations and deduction for sole proprietors, tax benefits should be calculated based on the investment amounts to venture companies for policy synchronization, and those amounts should be defined more accurately for the policy goal while the tax credit and deduction rates may as well be raised. Second, regarding nontaxable capital gains in venture investment, possible capital losses should be included in the net operating loss when calculating taxable incomes of both corporations and sole proprietors in order to make use of the tax saving effect occurred in case of unprofitable transactions. Finally, regarding the VAT exemption for assistant entities, the deemed input tax deduction should be adopted to remove the cascade effect and, as a result, keep up the after－tax rate of return of venture investment.

Keywords

  • Government tax proposal
  • Promotion of venture investment
  • Crowding out effect
  • Tax saving effect
  • Net operating loss
  • Cascade effect

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Asian Tax Journal

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