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Incomplete VAT rebates to exporters: how do they affect China's export performance?

Julien Gourdon (), Stéphanie Monjon and Sandra Poncet
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Stéphanie Monjon: LEDa - Laboratoire d'Economie de Dauphine - Université Paris-Dauphine
Sandra Poncet: CEPII - Centre d'études prospectives et d'informations internationales - CEPII - Centre d'Etudes Prospectives et d'Informations Internationales - Centre d'analyse stratégique

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Abstract: During the last decade, the Chinese government has frequently changed the value added tax (VAT) refund levels offered to exporters. Indeed, China’s VAT system is not neutral, in particular because the exporters may not receive complete refund of the domestic VAT paid on their inputs. This paper investigates how changes in the VAT rebates affect export performance in China. Our empirical analysis relies on export volume data at the HS6 product level over the 2003-12 period. To address potential endogeneity, we exploit an eligibility rule that disqualifies processingtrade with supplied materials from the rebates. We find that the adjustments to the VAT rebates have significant repercussions on the exported volume: a one percentage point increase in the VAT rebate can lead to a 7% increase in export volumes. This magnitude allows to better understand the strong resistance of China’s exports amid the global recession.

Keywords: China; VAT system; Export performance; Export tax (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-int and nep-tra
Date: 2017-03-28
Note: View the original document on HAL open archive server: https://hal.archives-ouvertes.fr/hal-01496998
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Working Paper: Incomplete VAT rebates to exporters: how do they affect China's export performance? (2014) Downloads
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