How distortive are turnover taxes? Evidence from China

Jing Xing, Katarzyna Bilicka, Xipei Hou and Sepideh Raei

Journal of Development Economics, 2024, vol. 171, issue C

Abstract: We investigate the impact of tax cascading on upstream and downstream firms. As a natural experiment, we explore a reform that replaced turnover taxes with value-added taxes for service industries in China, which effectively removed tax cascading. We find a relative increase in sales, R&D investment, and employment for affected service firms. These changes are mainly driven by increased outsourcing from manufacturing firms, and are unlikely to be caused by changes in firms’ tax burden or output prices. Our study provides new evidence on how taxation affects supplier networks and firm performance.

Keywords: Turnover tax; Value-added tax; Outsourcing; R&D investment (search for similar items in EconPapers)
JEL-codes: D25 H25 H26 O32 (search for similar items in EconPapers)
Date: 2024
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0304387824000816
Full text for ScienceDirect subscribers only

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:eee:deveco:v:171:y:2024:i:c:s0304387824000816

DOI: 10.1016/j.jdeveco.2024.103332

Access Statistics for this article

Journal of Development Economics is currently edited by M. R. Rosenzweig

More articles in Journal of Development Economics from Elsevier
Bibliographic data for series maintained by Catherine Liu ().