Analysis of the Impact of the Policy of Replacing Business Tax with VAT on the Economy

Boshen Chen ()
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Boshen Chen: Xijiao Liverpool, Economic, Business School

A chapter in Proceedings of the 2023 International Conference on Economic Management, Financial Innovation and Public Service (EMFIPS 2023), 2024, pp 4-18 from Springer

Abstract: Abstract To address the impact of unreasonable tax system on China’s economy, China began to implement the policy reform of “replacing business tax with VAT” in 2011 to optimize the tax system. This paper uses the panel data of economic indicators of provinces from 2005 to 2017, the economic benefits of the “replacing business tax with VAT” policy among regions were tested by double difference method. The study found that compared with the provinces that did not implement the “replacing business tax with VAT” in 2012, the provinces that implemented the policy in the same year have shown significant positive benefits for regional GDP and the number of nighttime lighting, mainly through three major mechanisms. According to the research results, this paper also puts forward substantive policy recommendations for the follow-up reform of “replacing business tax with VAT.”

Keywords: Replacing business tax with VAT; Economic impact; Differences-in-Differences method; Policy proposal (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:spr:advbcp:978-94-6463-441-9_2

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DOI: 10.2991/978-94-6463-441-9_2

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