The Danish government has suggested a new tax deduction scheme primarily aimed at investors in small, privately-held companies, according to a factsheet released by the Tax Ministry.

The government wants to encourage entrepreneurship, but in the current climate, many young businesses spend more time on investor pitches than on developing their product. Sometimes they get so demotivated they end up not even starting the company.

The historical practice of banks being the primary source of funds and investments for companies doesn’t help either, as it has left the market for private venture capital underdeveloped.

Over half a million kroner
With the new tax scheme, investors will be eligible to receive up to 650,000 kroner in tax deductions annually, making it easier for small businesses and startup companies to secure venture capital.

The proposal includes a provision for an immediate relief of 300 million kroner a year, but won’t come into effect until 2016 when it will be matched with EU rules on state aid.

The Tax Ministry estimates that the proposal could increase the GDP by 0.1 billion kroner by 2020.

The scheme is part of Europe’s growth strategy for the coming decade, ‘Europe 2020’.