China Economic Review (February  2017)，方红生、鲍雨欣、张军：Asymmetric reform bonus: The impact of VAT pilot expansion on China's corporate total tax burden.

      

Asymmetric reform bonus: The impact of VAT pilot expansion on China's corporate total tax burden

Hongsheng Fang

School of Economics, Zhejiang University

Yuxin Bao

School of Economics, Zhejiang University

Jun Zhang

School of Economics, Fudan University

   

Abstract:

China's VAT pilot program began in Shanghai and was extended to eight provincial-level regions in 2012. We develop a simple model to explore whether and how the VAT pilot expansion affects corporate total tax burden. We find that it will reduce corporate total tax burden of small-scale taxpayers, while for general taxpayers, total tax burden change is uncertain. Using unique company-level half-yearly panel data and general setting for DID analysis for multiple groups and multiple periods, we find that the average treatment effects of the VAT pilot expansion on corporate total tax burden of general taxpayers are insignificant in the pooled sample. Furthermore, the VAT program shows no heterogeneity between the transportation and modern services industries. However, we find that the pilot effect varies by deductible items. In particular, the reduction tax effect is stronger in companies with higher intermediate input rates, and the largest effect is 60.4%. These results are consistent with our conceptual framework.

   

Keywords：

VAT pilot expansion; Corporate total tax burden; Asymmetric reform bonus