Does Ownership Affect the Impact of Taxes on Firm Behavior? Evidence from China

Clemens Fuest and Li Liu

No 5316, CESifo Working Paper Series from CESifo

Abstract: Does ownership affect the way firms react to corporate taxation? This paper exploits key features of recent corporate tax reforms in China to shed light on the differential impact of taxation on firms under different ownership regimes including private, collectively owned and state owned companies. Employing a difference-in-difference estimation approach, we find that the increase in the deductibility of wage costs in 2006 has led to a sizable increase of wages per worker in private firms and an even larger increase in collective-owned enterprises. In contrast, there is no significant wage response in state owned enterprises. The decrease in the statutory tax rate for domestic firms since 2008 has induced collectively owned enterprises and private firms to reduce debt while there is no significant response SOEs. Our results also suggest that the 2008 reform has reduced tax induced investment round tripping through Hong Kong, Macao and Taiwan.

Keywords: corporate taxation; tax reform; state owned enterprises (search for similar items in EconPapers)
JEL-codes: H20 (search for similar items in EconPapers)
Date: 2015
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

Downloads: (external link)
https://www.cesifo.org/DocDL/cesifo1_wp5316.pdf (application/pdf)

Related works:
Working Paper: Does ownership affect the impact of taxes on firm behaviour? Evidence from China (2015)
Working Paper: Does ownership affect the impact of taxes on firm behavior? Evidence from China (2015)
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: https://EconPapers.repec.org/RePEc:ces:ceswps:_5316

Access Statistics for this paper

More papers in CESifo Working Paper Series from CESifo Contact information at EDIRC.
Bibliographic data for series maintained by Klaus Wohlrabe ().