China's local government debt and firm tax burden

Yining Yao, Min Guo, Ping Jiang and Lei Xu

Pacific-Basin Finance Journal, 2024, vol. 87, issue C

Abstract: We establish a relationship between China's local government debt (LGD) and the tax burden on firms. Using datasets of LGD and listed firms from 2009 to 2021, we find that LGD significantly reduces firm tax burden. The tax reduction effect of LGD is particularly pronounced in regions with business-friendly environments and lower fiscal pressure, and is more evident among state-owned enterprises (SOEs) and less-profitable firms. We also find that new government bonds demonstrate a stronger effect on reducing firm tax burden than refinancing bonds do. The strategic growth of LGD can be meaningfully applied to stimulate firm and regional growth.

Keywords: Local government debt; Firm tax burden; Fiscal pressure; China (search for similar items in EconPapers)
JEL-codes: H20 H71 H74 (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eee:pacfin:v:87:y:2024:i:c:s0927538x2400221x

DOI: 10.1016/j.pacfin.2024.102469

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