The Impacts of Tax Enforcement on Enterprises’ Digitization

Ying Jiang and Xiuqi Jiang

Emerging Markets Finance and Trade, 2025, vol. 61, issue 13, 4049-4070

Abstract: In recent times, the digital transformation of firms has emerged as a crucial element in fostering high-quality economic development in China, and tax is an important means for the government to intervene and regulate the economy. Based on the micro-data of Chinese A-share listed enterprises from 2007 to 2021, this article empirically tests the relationship between regional tax enforcement and enterprises’ digitization. The results show that strengthening tax enforcement helps promote enterprises’ digitization. The tests of effect identification reveal that there are “governance effect,” “tax effect” and “rent-seeking effect” in tax enforcement simultaneously, but the “governance effect” is mainly played in the digitization of enterprises. Considering the impact of institutional environment on taxing behavior, this article finds that a better institutional environment strengthens the governance effect of tax enforcement, thus promoting the digital transformation of enterprises. Furthermore, the contribution of tax enforcement to enterprises’ digitization is influenced by institutional investors and the ownership. This article not only expands the research on the influencing factors of enterprises digitization, but also enriches the relevant research on government-enterprise interaction from the perspective of government tax governance. The findings offer practical guidance for policymakers aiming to deepen tax reforms and foster digital transformation.

Date: 2025
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DOI: 10.1080/1540496X.2025.2503933

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