Venture capitalists and tax professionals agree tax incentives for venture capital companies are being abused, but are unanimous in their view that Treasury’s proposed remedy will deal the industry a death blow. The proposed amendments to the tax incentive have had a paralysing effect on the industry, the Southern African Venture Capital and Private Equity Association (Savca) said in parliament on Tuesday. Savca and tax professionals who made submissions on the proposed amendments during public hearings by parliament’s finance committee, all agreed the incentive was being abused — for example, in the purchase of holiday homes — but said the way Treasury proposed to deal with this abuse was too far-reaching and not sufficiently targeted. Treasury has proposed amendments to the structure of venture capital companies in order for them to qualify for tax incentives under section 12J of the Income Tax Act.

The main proposed amendment in the Taxation Laws Amendment Bill is that ther...

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