“Business Tax to Value-added Tax” and Enterprise Innovation Output: Evidence from Listed Companies in China

Cao, Qingzi; Wang, Hua; Cao, Liguo

doi:10.1080/1540496x.2021.1939671

Cited by 14 publications

(5 citation statements)

References 13 publications

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“…Contrariwise, VAT may impact export performance, as a 1% reduction in export VAT in China results in a 7.2% increase in the value of permitted exports (Gourdon et al, 2022 ). In addition, the change in a country’s business tax to VAT reform has also encouraged organizations to expand innovation output and content (Cao et al, 2022 ). In Indonesia, both the introduction of electronic invoices and taxpayer compliance have had a significant positive impact on VAT revenue.…”

Section: Results Analysis and Discussionmentioning

confidence: 99%

“…Furthermore, evidence from listed companies in China reveals that converting business taxes to VAT has encouraged organizations to expand their innovation output and practical innovations. In addition, the level of R&D investment occupies a middle ground between the association between commercial tax changes to VAT and the overall innovation output and the association between corporate tax changes to VAT and the applicable innovation output of firms (Cao et al, 2022 ).…”

Section: Review Of Related Literaturementioning

confidence: 99%

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Value-added-tax rate increases: A comparative study using difference-in-difference with an ARIMA modeling approach

Mgammal

Al‐Matari

Alruwaili

2023

Humanit Soc Sci Commun

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Collecting and managing taxes is a critical keystone to protecting a country’s financial intensity and developing a country’s tax system, where value-added tax (VAT) has proven to be a nurturing and steady foundation of income for governments. VAT is a primary source of financial gain in developing nations, which differs from economic income in developed nations, where economic income is primarily derived from tax income. This study examines the influence of the new VAT on non-financial Saudi-listed companies. We compared and examined the impact of the newly introduced 15% VAT in various non-financial sectors. Using charts, tables, appropriate variance analysis, and ARIMA model in the Difference in Difference approach. Regarding data, we targeted 2019 before the new VAT, the discovery of COVID-19, and 2020 after the new VAT and during the COVID-19 pandemic. Results show that a sharp increase in VAT (with other unmeasured variables in this study) has a significant positive/negative impact on inter-industry volatility in corporate financial reporting metrics and was even more dramatic with the COVID-19 disaster. The proposed 10% VAT increase has caused significant fluctuations in companies’ metrics, for example, a decrease in average profits—2.16%, an escalation in more inactive companies, and a higher probability of bankruptcy among companies. Such an outcome would undoubtedly affect unemployment and possibly lead to a reduction in tax revenues in the long run. The consequences of an unexpected VAT increase raise the question of whether they accurately reflect the natural tax system in Saudi Arabia. Therefore, the Saudi government may consider the practical implications of outcomes before taking the next step in interventions in non-financial sectors.

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Section: Results Analysis and Discussionmentioning

confidence: 99%

Section: Review Of Related Literaturementioning

confidence: 99%

Value-added-tax rate increases: A comparative study using difference-in-difference with an ARIMA modeling approach

Mgammal

Al‐Matari

Alruwaili

2023

Humanit Soc Sci Commun

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“…Ni, Wang and Wang [ 2 ] point out that the tax burden effect created investment-shifting in the fixed assets. Innovation output and substantive innovation are promoted by “BT to VAT” [ 4 ]. In terms of firms’ performance, Zou, Shen and Gong [ 5 ] consider short-term liabilities, long-term liabilities and the total asset-liability ratio as the common indicators, and find that the first one dropped and the others were raised by China’s VAT reform regarding fixed investment in 2007.…”

Section: Literature Reviewmentioning

confidence: 99%

China’s value-added tax policy and intertemporal optimal assets allocation of enterprises——Based on the dual perspectives of VAT input refund and VAT rate

Liu

2023

PLoS ONE

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The article sought to detect the impact of the value-added tax (VAT) policy on the enterprises’ asset allocation from the dual perspectives of the VAT input refund and the VAT rate. Based on the influenced mechanism of the VAT input refund and the tax burden effect (and the price effect) caused by the VAT rate, enterprises’ intertemporal optimal asset allocation models are constructed under the states of adopting the VAT input refund and maintaining the theoretical tax (non-)neutrality of VAT. When VAT rates of the general taxpayers are predicted to be reduced, we also use China’s manufacturing and economic data to simulate specific cases to verify propositions under different states. The results show that: (1) When the VAT output tax rate decreases: if returns to scale are diminishing, enterprises will increase the number of productive material assets and labor and reduce financial assets. (2) When the VAT input tax rate reduces: under the state of adopting the VAT input refund and maintaining the theoretical tax (non-)neutrality of VAT, if returns to scale are decreasing, enterprises will reduce the number of productive material assets and labor and increase financial assets. Under the state of adopting the VAT input refund and maintaining the theoretical tax neutrality of VAT, if returns to scale are increasing and the expected rate of return of financial assets is lower than the additional tax rate, or the enterprise has diminishing returns to scale and the expected rate of return of financial assets is higher than the additional tax rate, enterprises will increase the number of productive material assets and labor. (3) When VAT output and input tax rates reduce simultaneously: under the state of adopting the VAT input refund and maintaining the theoretical tax neutrality of VAT, if returns to scale are increasing and the expected return rate of financial assets is higher than the additional tax rate, the enterprise will reduce the number of productive material assets and labor and increase financial assets. Under the diminishing returns to scale in China’s national economy, the research conclusions endorse the rational necessity of the VAT policy change—VAT rate reduction to develop the entity economy and provide a reference for enterprises to make asset allocation decisions. The conclusions also provide possible changes in VAT policy for different countries according to their actual economic conditions.

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“…Bai and Wu find that the "BT to VAT" reform policy is effective in improving the investment efficiency of Chinese firms, increasing liquidity, and reducing firms' reliance on external financing [21]. Cao et al found a significant increase in output efficiency and substantive innovation among firms after the "BT to VAT" [22]. The "BT to VAT" policy has also increased the income distribution of residents [23].…”

Section: Literature Reviewmentioning

confidence: 99%

Can the Reform of the Transfer Tax System Affect Corporate Green Innovation—Evidence from China’s “BT to VAT” Reform

2023

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Taxation has long been an important tool for dealing with externalities, and studying whether tax policies can be linked to today’s green development trend can help macroeconomic decisions influence the green transformation of enterprises. The article uses the business tax to VAT reform (BT to VAT), the largest turnover tax reform in recent years that took place in China from 2012 to 2016, as an example. The policy effect model was constructed using the difference in difference method to explore the driving effect of the tax reform and related variables on corporate green innovation. The results show that the policy effect of tax reform can effectively promote an enterprise’s green innovation behavior, with the promotion effect on invention-based green patents being significantly higher than that on utility-based green patents; there is a certain time lag in the promotion of green innovation by the policy effect of tax reform, with a significant effect starting from the third year of the policy. The green innovation behavior of enterprises is influenced by the characteristics of enterprises, with a significant positive correlation with enterprise size and operating capacity. Green innovation behavior is influenced by the characteristics of enterprises and has a significant positive correlation with the size and operating capacity of enterprises. The implementation of the policy of ‘reducing taxes and fees’ is conducive to green innovation, and an effective tax reform should be formulated gradually in response to the national conditions and market situation; on the basis of quality assurance, unnecessary steps in the process of green patent application and approval should be reduced to improve the efficiency of green innovation; effective social supervision or the appropriate realization of corporate equity can be adopted to promote green innovation. Corporate equity to promote corporate green innovation.

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“Business Tax to Value-added Tax” and Enterprise Innovation Output: Evidence from Listed Companies in China

Cited by 14 publications

References 13 publications

Value-added-tax rate increases: A comparative study using difference-in-difference with an ARIMA modeling approach

Value-added-tax rate increases: A comparative study using difference-in-difference with an ARIMA modeling approach

China’s value-added tax policy and intertemporal optimal assets allocation of enterprises——Based on the dual perspectives of VAT input refund and VAT rate

Can the Reform of the Transfer Tax System Affect Corporate Green Innovation—Evidence from China’s “BT to VAT” Reform

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