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Pre-Tax Deduction Policy for Employee Education Expenses and Corporate Digital Transformation: Evidence From China

Huiqiang Ni, Zhen Yang, Wenlong Liu and Jianxia Cui

SAGE Open, 2025, vol. 15, issue 2, 21582440251342086

Abstract: The digital economy is a cornerstone of high-quality development and sustainability. This study employs a difference-in-differences approach to investigate how tax incentives, specifically those induced by the pre-tax deduction of employee education expenses, influence corporate digital transformation. We find that increasing the pre-tax deduction ratio for employee education expenses significantly promotes corporate digital transformation, with the effect being more pronounced in non-state-owned enterprises, start-ups, declining firms, companies with higher tax burdens, and firms facing severe financing constraints. Mechanism tests reveal that the policy primarily drives corporate digital transformation through three core channels: alleviating financing constraints, upgrading human capital, and fostering innovation-driven initiatives. These findings provide valuable policy insights for deepening supply-side structural reforms and achieving high-quality economic development.

Keywords: tax incentives; digital transformation; employee education expenses; DID; policy analysis (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:sae:sagope:v:15:y:2025:i:2:p:21582440251342086

DOI: 10.1177/21582440251342086

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