Beijing plans to roll out more tax incentives to encourage venture capital investments in mainland start-up businesses in the hope of widening such firms' access to funds. In 2007, the national tax office, in order to bolster venture capital investments in unlisted start-up technology firms, allowed venture capital funds investing in hi-tech firms to pay a lower rate of corporate tax. According to the official China Securities Journal, the State Administration of Taxation is studying changes that would allow them to enjoy the same tax break on investments in non-hi-tech firms. The newspaper said the incentives would soon also apply to small non-hi-tech firms as part of an effort to meet their increasing financing needs. The tax office wasn't available for comment yesterday. Under current rules, a mainland venture capital group is subject to profits tax of 25 per cent. With the tax incentive, if a venture capital fund posts net profit of 100 million yuan and has invested 10 million yuan in a start-up hi-tech firm, 70 per cent of the investment can be offset against the fund's net profit. Consequently, the fund's taxable net profit is reduced by 7 million yuan, meaning only 93 million yuan of actual net income is subject to the corporate income tax. Thus its tax bill is reduced by 1.75 million yuan. 'It is necessary to widen the criteria so that venture capitalists would be interested in investing more money into all kind of small companies,' said Ray Lu, a manager at Hotung Ventures. 'The tax incentives could help a little to ease the capital crunch the mainland's small companies are facing now.' The newspaper did not say when the policy change could be implemented, but it quoted Zhu Zhixin, deputy director of the National Development and Reform Commission, as saying that the central government should speed up its fine-tuning of the policy and implement the changes soon to underpin small businesses. Beijing's monetary tightening since last year has taken its toll on the millions of small companies on the mainland because they could not secure loans to buy the raw materials needed to fulfil orders or undertake expansion. The All China Federation of Industry and Commerce, the official chamber of commerce for non-state- owned companies, handed a report to the State Council recently warning small companies were facing a situation worse than in 2008 when the global financial crisis began.