Taxation and Enterprise Innovation: Evidence from China’s Value-Added Tax Reform

Ke Ding, Helian Xu and Rongming Yang
Additional contact information
Ke Ding: School of Economics and Trade, Hunan University, Changsha 410006, China
Helian Xu: School of Economics and Trade, Hunan University, Changsha 410006, China
Rongming Yang: International Student Education and Administration Office, Yunnan University of Finance and Economics, Kunming 650221, China

Sustainability, 2021, vol. 13, issue 10, 1-20

Abstract: This article used China as an example to study how tax reform affects the innovative behavior of companies. Our research showed that value-added tax (VAT) reform can affect corporate innovation behavior. On the basis of patent-application data of Chinese enterprises, we used the difference-in-differences framework to study the differences in the performance of Chinese industrial enterprises in patent applications before and after China’s 2009 VAT reform. We demonstrated that China’s VAT reform had a positive impact on corporate innovation; this conclusion is robust. In subsequent research, we demonstrated that the VAT reform promoted corporate innovation by expanding corporate investment in fixed assets and reducing corporate debt ratios; however, due to the Chinese government’s subsidies to corporations and financing constraints, the pecking-order effect of corporate innovation was increased. In addition, the VAT reform had a greater impact on the innovation of export enterprises and non-state-owned enterprises. This research provided insights for emerging countries into formulating innovation-driven sustainable development tax reduction policies.

Keywords: VAT; reform; enterprise innovation; China; difference-in-differences (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
https://www.mdpi.com/2071-1050/13/10/5700/pdf (application/pdf)
https://www.mdpi.com/2071-1050/13/10/5700/ (text/html)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:gam:jsusta:v:13:y:2021:i:10:p:5700-:d:557782

Access Statistics for this article

Sustainability is currently edited by Ms. Alexandra Wu

More articles in Sustainability from MDPI
Bibliographic data for series maintained by MDPI Indexing Manager ().