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10.11.2005 Business & Finance

BUDGET: Venture Capital Fund to become operational

By GNA
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Accra, Nov. 10, GNA - The government-sponsored Venture Capital Fund would become operational in December this year.

Mr. Kwadwo Baah-Wiredu, Minister of Finance and Economics Planning, presenting the 2006 budget to Parliament on Thursday said government had decided to grant generous incentive package to attract private investors to the sector.

The decision followed the identification that venture capital investment was an instrument that could boost investments for accelerated growth.

The Minister therefore, announced some tax incentives saying, "We are pleased in this budget, therefore, to announce the following tax incentives for venture capital firms which meet the eligibility requirements in the Act."

The incentives are the upfront relief from stamp duty in each year on subscriptions for new equity shares in venture capital funds, the full tax exemption from corporate income tax, dividend tax and capital gains tax for five years and the provision for the losses from disposal of the shares during the tax exempt period to be carried forward to the post-exempt period up to five years.

Also, financial institutions, which invest in venture capital subsidiaries, will receive a chargeable income tax deduction equal to 100 per cent of their investment.

"... with these tax measures, we expect that a critical mass of venture capital companies will emerge to drive government's accelerated growth strategy. The anticipated stimulation of the SME sector from a vibrant venture capital industry will further boost job creation and the country's tax revenue base," Mr Baah-Wiredu added.

Parliament passed the Venture Capital Trust Fund Act in December 2004 to improve access to long-term capital by small-and medium-scale enterprises.

The Fund is also aimed to stimulate the emergence of a sustainable private-owned venture capital industry in Ghana. Contributions to the Fund are generated from the earmarked 25 per cent of the National Reconstruction Levy.

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