| ID | 187810 |
| Title Proper | BT-to-VAT reform and firm productivity |
| Other Title Information | evidence from a quasi-experiment in China |
| Language | ENG |
| Author | Qi, Yu ; Yu, Jinliang |
| Summary / Abstract (Note) | China recently initiated a major tax reform to convert business tax to value-added tax (BT-to-VAT reform), which opened up the tax deduction chain between industries. We used difference-in-differences model and an administrative firm-level dataset from 2011 to 2017 to explore the effect of BT-to-VAT reform on productivity. We found that in contrast to control firms, this reform increased the productivity of the treated firms by 14.6% on average. The positive effects tended to be strengthened in private, large-scale, and capital-intensive firms, as well as in firms with tight financing constraints. Moreover, these positive results of the BT-to-VAT reform appeared to be driven by its positive effect on fixed asset investment, R&D expenditure, and specialization. These findings demonstrate the transformation of tax system has multiple economic effects in developing countries. |
| `In' analytical Note | China Economic Review Vol. 71; Feb 2022: p.101740 |
| Journal Source | China Economic Review 2022-01 71 |
| Key Words | China ; Productivity ; Value-Added Tax ; Business Tax |