China has introduced the GTP III system, an advanced digital technology aimed at enhancing tax collection efficiency. However, the system's rollout has varied across provinces, leading to disparities in tax collection capabilities nationwide. This variation has provided conglomerates with opportunities to engage in tax planning by adjusting their capital structure. This paper examines the strategies employed by conglomerates in response to stricter tax enforcement, focusing on how they reallocate interregional debt and expenses. Our findings indicate that conglomerates allocate deductible debts and expenses to provinces where the GTP III system is operational, resulting in significant tax savings. This behavior is more pronounced when conglomerates have strong motivations for tax planning or engage in more aggressive tax strategies. Additionally, conglomerates adjust their debt management strategies, increasing short-term debt to reduce tax liabilities while limiting long-term debt to maintain a well-balanced capital structure.

This paper examines the impact of simultaneously strengthening environmental data authenticity constraints and targeted environmental incentives in officials' performance evaluation system on local air pollution governance. To do so, we construct a simple theoretical model to illustrate the behaviors of local governments under strengthened environmental constraints and incentives in the context of China's new air quality standards (NAQS). We then evaluate the effectiveness of NAQS using the 2008-2016 Chinese city-level panel data and the staggered difference-indifferences (DID) method. We find that the implementation of NAQS resulted in an average decrease of 1.50 % in PM2.5 concentration in pilot cities, and exhibits heterogeneity under different levels of environmental decentralization, local environmental protection tendencies, and officials' promotion incentives. Mechanism analysis suggests that this effect may be achieved by increasing the share of local government environmental expenditures and promoting industrial greening. Cost-benefit analysis shows that the Chinese government is willing to pay a premium for immediate pollution reductions. We also further discuss the impacts of NAQS on other air pollutants and carbon emissions. Our findings provide empirical evidence for simultaneously strengthening constraints and incentives related to environmental protection in officials' evaluation system to promote pollution control. This provides a valuable reference for developing countries to consider similar policies.

China introduced the value-added tax (VAT) rate reform in 2017 to reduce the burden on firms and stimulate the economy. This study builds a simple theoretical framework and employs the 2017 VAT rate reform as a quasi-natural experiment to evaluate the effects of the VAT rate reform on the corporate tax burden. We find that the VAT rate reform significantly reduces the corporate total tax burden by 9.1% (an effect mainly driven by the decrease in the VAT burden), while the reform has no significant impact on enterprise income tax burden. Furthermore, the effects of VAT reduction on the corporate tax burden are primarily significant in firms with lower intermediate input ratios, firms facing lower market monopolies, firms from eastern China and firms with high-fixed assets.

This paper uses China's value-added tax(VAT)rate reform as a quasi-natural experiment to identify the impacts of VAT rate shocks on corporate financial leverage.The results indicate that the reform reduced corporate total leverage significantly.There was a decrease in short-term leverage,but long-term leverage showed no significant change.These results remained robust across a series of robustness checks.Mechanism analysis shows that increasing profitability and improving cash flows acted as intermediary channels for the reform's impact on leverage.The reform also contributed to the mitigation of the asset-liability mismatch problem and the reduction of debt risk,while having no apparent impact on corporate investments.Finally,enterprises with more elastic demand and those with lower intermediate input ratios were affected most by the deleveraging effect of the VAT rate reform.This study suggests how the VAT rate cut shaped corporate capital structure.It thus helps to explain the economic consequences of VAT rate shocks.

This paper extends the existing studies of cyclical fiscal policy by providing the first systematic theoretical and empirical study of cyclical quasi-fiscal investment of state-owned enterprises (SOEs) in China. Using data from Chinese listed companies and the System GMM method, the results show that: (1) both central and local SOEs exhibit expansion-biased investment behaviours; (2) the expansion-biased investment of central SOEs mainly goes to the tertiary industry and the western regions of China, while the expansion-biased investment of local SOEs mainly occurs in the tertiary industry and the middle and western regions of China; (3) during the economic recession, the higher the local growth targets, the more bank credit central and local SOEs can obtain, and the more pronounced the expansion-biased investment. The study shows that apart from the countercyclical fiscal policy implemented by central and local governments, the quasi-fiscal function of central and local SOE investments is also key for the Chinese economy to quickly recover from recessions.

ABSTRACT Using China’s 2008 enterprise income tax (EIT) reform, this study examines the effect of EIT on corporate innovation comprehensively. Based on accurate identification of the direction of changes in the corporate tax rate, we introduce two dummy variables of tax rate decline and escalation to investigate the impact of EIT changes simultaneously. Using the firm-level dataset from China’s A-share listed companies, we find that the innovation level of tax-rate-declining enterprises will increase by 0.2%, whereas the innovation level of tax-rate-increasing enterprises will decrease by 0.4%. The dynamic effect demonstrates that the aforementioned promoting and inhibitory effects are continuous. Heterogeneity analyses reveal that the changes in the EIT rates have a greater impact on the innovation level of enterprises with high innovation demand, manufacturing enterprises, enterprises in a high rule of law environment, and enterprises in the eastern region. Our study highlights the importance of the EIT reform on corporate innovation and guides how to better optimize the effectiveness of such policies.

This paper develops a simple model to study the influence of China's value-added tax (VAT) rate reform on employment. The model delivers important information about how monopoly and unskilled labor enhances the substitution of non-labor factors for labor. Taking China's VAT rate reform as a quasi-natural experiment, this paper examines the model's predictions with a difference-in-differences (DID) approach. The results suggest that China's VAT rate reform has a negative employment effect and that the decrease in the relative price of non-labor inputs to labor serves as an important channel through which non-labor factors squeeze labor out. Reducing the degree of market monopoly and improving the skill level of labor can effectively mitigate the adverse impact of the reform on employment.

This paper takes the perspective of fiscal decentralization among sub-provincial governments to examine the effect of Province-managing-county（PMC） reform on the income gap between urban and rural areas. Theoretically, PMC reform has increased local tax-sharing rate and inter-governmental transfers, which force local governments to face more intense horizontal competition, extending a “grabbing hand” to the rural areas, and choose a development strategy that favors capital-intensive industries. Those two logical approaches widen the income gap between urban and rural areas in the county. Empirically, the main findings are as follows. First, PMC reform has widened the income gap. Second, the effects of PMC reform vary in different regions. PMC reform has a positive impact on the gap between urban and rural areas in eastern and middle regions. But it has an opposite impact in minority, poverty and western regions. It has no impact in grain-producing counties and border counties. Third, the mechanism analysis shows that two channels of PMC reform are intense horizontal competition among counties and governmental development strategy that favors capital-intensive industries.

近十年来,许多学者发现,无论是应对20世纪30年代的大萧条,还是应对2008年全球性金融危机,大量国家倾向于采用国有化的手段而将国有企业作为宏观调控的一个有用的临时性应急工具. 国有企业在中国的经济体系中发挥着重要作用,在面对经济衰退时,中国政府是否将国有企业作为宏观调控的一个工具便成为一个值得研究的重要问题.

To stimulate economic growth, the Chinese government implemented three consecutive policies between 2016 and 2019 to reduce the corporate endowment insurance contribution ratio (CEICR), the highest payment item for Chinese companies. Using China's CEICR reduction policies as a quasi-natural experiment, this paper evaluates the impact of corporate payment burden reduction on employee wages. Generally, reducing CEICR appears to prompt companies to increase employee wages. Corporate cash flow is a possible channel of influence. Moreover, the positive effect is found to be more pronounced in companies that are more labor intensive, performing better in labor payment compliance, and located in regions with higher pressure for elderly care. This paper offers evidence in favor of implementing CEICR reduction policies from the perspective of improving the well-being of employees.

With a persistent global economic slump, governments encourage economic growth by expansionary fiscal policies through tax cuts. Total factor productivity (TFP) is an important determinant of corporate development and economic growth. Taking China's 2008 Corporate Income Tax Reform as a quasi-natural experiment, this paper uses data from China's A-share listed companies from 2003 to 2018 and difference-in-differences analyses to identify the impact of corporate income tax (CIT) rate changes on TFP. The findings indicate that reducing the CIT rate positively impacts corporate TFP through two available channels: corporate investment and human capital investment. Additionally, the effects of reducing the CIT rate on TFP are primarily significant in non-state-owned, smaller and more financing-constrained enterprises.

How to stimulate corporate performance is a crucial issue of general concern in all countries. This paper examines how China's Income Tax Revenue Sharing Reform in 2002 affects corporate financial performance. Unlike general tax policies that directly adjust the nominal tax rate or depreciation allowance, this reform indirectly affects the effective Enterprise Income Tax (EIT) rate by switching tax administration, thereby affecting corporate financial performance. We use a firm-level data-set from Annual Survey of Industrial Firms (ASIF), and test the impact by using a quasi-natural experimental design through regression discontinuity design (RDD). We find that after the reform, the effective EIT rate (ETR) of enterprises collected EIT by State Administration of Taxation (SAT) was 10% lower than that of enterprises collected EIT by the Local Administration of Taxation (LAT). If the ETR reduces by 1%, corporate financial performance, more specific, Return on Asset (ROA), increases by 1.7%. There are two available channels: increasing fixed asset investment (FAI), and alleviating external financial constraints. Additionally, the impact can be weakened for locally SOEs, large firms, firms with low SA index and those in less competitive industries.

Using a difference-in-differences (DID) approach, this paper evaluates the effects of China's accelerated depreciation policy on corporate leverage. We find that the policy significantly increases corporate total leverage, which is mainly driven by the increase in long-term leverage. Moreover, raising investment in fixed assets serves as the primary mediating channel through which the policy affects long-term leverage and thus, total leverage. Finally, the positive effects of the policy on leverage are primarily significant in firms that are not close to tax exhaustion, and firms that invest in long-lived assets.

How to stimulate enterprise investment is a dilemma facing most countries, and tax incentives are frequently used as a solution. This study explores how China's Income Tax Revenue Sharing Reform affected enterprises' fixed asset investment (FAI). This reform did not modify the nominal tax rate or depreciation allowance directly but changed the effective enterprise income tax (EIT) rate via switching tax administration indirectly. And the change in the effective EIT rate should affect firm investment. This paper uses a regression discontinuity (RD) design to conduct a quasi-natural experiment of the reform in 2002 based on an enterprise-level dataset from the Annual Survey of Industrial Enterprises (ASIE). After the reform, the effective EIT rate (ETR) of enterprises collected by the State Administration of Taxation (SAT) was 11% lower than that collected by the Local Administration of Taxation (LAT). FAI improves by 0.7% for every 1% decrease in ETR. Tax avoidance is a key channel for the ETR to affect FAI. The FAI of smaller companies, non-state-owned enterprises (SOEs) and companies with high size-age (SA) indexes has responded more significantly to the change in ETR brought about by reform.

Using firm-level data of companies listed on China's A-share market from 2006 to 2017, this research applies a difference-in-differences (DID) empirical method to test whether the state policy in China used for identifying firms as being "high-tech" enhances their innovative capabilities. This paper presents three main findings. First, multiple robustness tests confirm that the state technology identification policy does improve the total number of patent applications as well as the number of patent invention applications. Second, government subsidy is an important channel through which this policy affects a firm's innovation capabilities. Third, this policy has a more prominent and positive influence on the innovation capabilities of firms located in regions where there exist a higher rate of taxation in addition and relatively more developed products and factor markets. Fourth, we conduct a flexible back-of-the-envelope cost-benefit analysis to demonstrate that the high-tech firm identification policy does improve the overall level of social welfare. The empirical results of this paper have far-reaching implications for China's innovation policies.

This study evaluates the effects of China's 2014 and 2015 accelerated depreciation policies on the relative demand of firms for skilled labor. We develop a simple model to explore how the policies affect the relative demand of firms for skilled labor and illustrate the roles of financing constraints and tax compliance in mediating the policy effects. We then employ a firm-level dataset from China's A-share listed companies and use a quasi-experimental design to examine the model predictions. We find that the policies significantly increase the relative demand of firms for skilled labor. The channels underlying the policy effects are that the policies generate additional cash flow for firms, stimulate investment and, thus, raise the demand of firms for skilled labor with the presence of capital–skill complementarity. We also find that the positive effects of the policies on the relative demand for skilled labor are primarily significant for firms with strong financing constraints and high tax compliance. Moreover, we document the positive effects of the policies on R&D investment, firm value added, productivity, workers' benefits, and corporate social responsibility performance, which further corroborate our main results.

本文从居民储蓄视角探讨中国政府债务的可持续性,并结合政府财政反应函数演变趋势和负债上限决定机制,分析居民储蓄对政府债务可持续性的影响.研究发现:现阶段中国居民储蓄会增大财政调整成本,居民储蓄提高了政府负债均衡点,但需要警惕居民储蓄过高放大经济无效性的风险;居民储蓄通过债务耐受度会影响政府偿付意愿,对政府债务是否可持续产生关键影响;中国从2019年开始财政空间呈大幅下降趋势,政府应关注财政空间的利用效率.

This paper uses popular approaches to measure fluctuations in tax centralization and the decomposition of changes in tax centralization to explain the inverted U-shaped curve of tax centralization in China. The results show that 1) during the 2002–2007 period, the within-sector effect played a dominant role in the increase in tax centralization and 2) during the 2008–2016 period, the between-sector effect was the main reason for the continued decline in tax centralization. To avoid this continued decline in tax centralization, we argue that the central government should ensure that the within-sector tax centralization of other services is not lower than that of the industry sector.

Using data from China Annual Survey of Industrial Firms and addressing potential endogeneity problem, we find that corporate tax burden in China is procyclical during recessions and countercyclical during booms. The cyclicality is stronger for enterprises whose corporate income taxes are levied by Local Tax Bureau (LTB). Procyclicality of corporate tax burden during recessions is larger for enterprises located in county, non-state-owned enterprises (non-SOEs), non-high-tech enterprises and large-medium enterprises. Furthermore, tax quotas and growth targets of local governments enhance procyclicality during recessions and the countercyclicality of corporate tax burden during booms. Tax collection and government spending are important channels through which tax quotas and growth targets affect the cyclicality of corporate tax burden, respectively. This paper provides important policy implications for China during economic recessions.