Firm Take-Up of a Corporate Income Tax Cut: Evidence from Vietnam

Anh Pham

National Tax Journal, 2019, vol. 72, issue 3, 575-598

Abstract: This paper examines whether and why a sizable portion of eligible firms in Vietnam did not claim a 30-percent temporary corporate income tax reduction, part of a stimulus package to boost the economy during the Global Financial Crisis. Using census firm-level panel data supplemented with survey data collected for this study, I find that only 40–60 percent of eligible firms claimed the tax cut. This low take-up rate is surprising in the context of under-reporting behavior in which businesses try in many ways to reduce their tax liability. Using a difference-in-differences approach with firm-level fixed effects, I find that nonclaiming firms were either not aware of the policy or were afraid of a tax audit. The government’s policy may have boosted the economy by more had more firms known they could qualify for a tax cut.

Date: 2019
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