Economics at your fingertips  

The effect of investment tax incentives: evidence from China’s value-added tax reform

Lei Zhang (), Yuyu Chen () and Zongyan He ()
Additional contact information
Lei Zhang: Shanghai Jiao Tong University
Zongyan He: Shanghai Shenyin & Wanguo Securities Research Co. Ltd

International Tax and Public Finance, 2018, vol. 25, issue 4, 913-945

Abstract: Abstract We estimate the impact of investment tax credit on firm fixed investment in a difference-in-differences-in-differences framework, using China’s 2004 value-added tax reform pilot that introduces a permanent 17%-tax credit for fixed investment in six industries in the Northeastern region. The tax credit raises significantly fixed investment of eligible firms by 28% on average during 2004–2007 relative to 2001–2003, corresponding to a user cost elasticity of 1.84. The tax incentive has larger effects on firms that are less financially constrained such as smaller firms and firms with a larger cash flow. The result is largely driven by responses of domestic private firms and is robust to specifications addressing the issue of anticipation.

Keywords: Firm fixed investment; Investment tax credit; Value-added tax reform; China (search for similar items in EconPapers)
JEL-codes: G31 H25 H32 (search for similar items in EconPapers)
Date: 2018
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed

Downloads: (external link) Abstract (text/html)
Access to full text is restricted to subscribers.

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:

Ordering information: This journal article can be ordered from
http://www.springer. ... ce/journal/10797/PS2

Access Statistics for this article

International Tax and Public Finance is currently edited by Ronald B. Davies and Kimberly Scharf

More articles in International Tax and Public Finance from Springer, International Institute of Public Finance Contact information at EDIRC.
Bibliographic data for series maintained by Sonal Shukla ().

Page updated 2019-12-18
Handle: RePEc:kap:itaxpf:v:25:y:2018:i:4:d:10.1007_s10797-017-9475-y