China’s VAT reform, and Its Effects on Enterprises’ Tax Burden and Innovation

Haibo Feng (), Sheng Liu () and Fei Xu ()
Additional contact information
Haibo Feng: Jinan University, College of Economics, Postal: Guangzhou, China
Sheng Liu: Guangdong University of Foreign Studies, School of Economics and Trade, Postal: Guangzhou, China
Fei Xu: Department of Economics, Umeå University, Postal: Department of Economics, Umeå University, S 901 87 Umeå, Sweden, https://www.umu.se/handelshogskolan

No 1008, Umeå Economic Studies from Umeå University, Department of Economics

Abstract: The impact of China’s VAT reform on enterprise innovation is the result of the combination of tax cuts and endogenous incentives. We find evidence that China’ VAT reform generally reduced the tax burden of firms but had a different impact on the manufacturing and the service industry. The tax burden of the manufacturing dropped significantly, but that of the service industry did not change markedly. Furthermore, we show that China’s VAT reform had also a significant positive impact on corporate innovation for both the service industry and the manufacturing. However, these effects were significantly greater in the manufacturing. Meanwhile, China’s VAT reform did not alleviate the tax burden of all the enterprises. For the enterprises facing the increased burden of tax, the reform can still stimulate the enterprise innovation if it has sufficient own capital, whereas the impact coefficient and significant level reduced significantly compared with the enterprises that the burden of tax reduced. If the enterprise’s own capital is insufficient, VAT reform has little effect on enterprise innovation. Finally, we show that China’s VAT reform exerted different influences on the innovative behavior of heterogeneous enterprises.

Keywords: China’s VAT reform; Tax Burden; Innovation (search for similar items in EconPapers)
JEL-codes: H25 H32 O31 (search for similar items in EconPapers)
Pages: 27 pages
Date: 2022-09-06, Revised 2024-10-24
New Economics Papers: this item is included in nep-acc, nep-cna, nep-pbe, nep-pub and nep-sbm
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://www.usbe.umu.se/ues/ues1008-20241024.pdf Full text (application/pdf)

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:hhs:umnees:1008

Access Statistics for this paper

More papers in Umeå Economic Studies from Umeå University, Department of Economics Department of Economics, Umeå University, S-901 87 Umeå, Sweden. Contact information at EDIRC.
Bibliographic data for series maintained by David Skog ().