Impact of the VAT reduction policy on local fiscal pressure in China in light of the COVID-19 pandemic: A measurement based on a computable general equilibrium model

Yue Mei Guo and Yun Rui Shi

Economic Analysis and Policy, 2021, vol. 69, issue C, 253-264

Abstract: Value added tax (VAT) reduction is an important tool for cultivating new driving forces for economic development, and it has had a notable impact on local fiscal pressure. Taking the 2018–2019 VAT rate reduction in China as an example, this paper uses a CGE model to estimate the impact of the VAT reduction policy on local fiscal pressure in China in light of the COVID-19 pandemic. The results show that local fiscal pressure increased from 0.342 to 0.435, an increase of 27.08%. The study provides policy implications on optimizing tax structure and alleviating local fiscal pressure.

Keywords: VAT reduction policy; COVID-19; Local fiscal pressure; Local financial risks; CGE model (search for similar items in EconPapers)
Date: 2021
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Citations: View citations in EconPapers (11)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecanpo:v:69:y:2021:i:c:p:253-264

DOI: 10.1016/j.eap.2020.12.010

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