Corporate Tax Cuts for Small Firms: What Do Firms Do?

Cui, Wei; Wei, Mengying; Xie, Weisi; Xing, Jing

doi:10.2139/ssrn.3950973

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Contemporary Policies1

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2022

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References 45 publications

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“…During the analyzed time period, the Chinese government enacted several other tax policies. First, there was a nationwide corporate tax rate cut for small and micro-profit enterprises (SMPEs) (Cui, Wei, Xie and Xing, 2021), which is unlikely to affect listed firms in our sample. Second, China introduced accelerated depreciation for selected manufacturing industries since 2014.…”

Section: Contemporary Policiesmentioning

confidence: 99%

How Distortive are Turnover Taxes? Evidence from Replacing Turnover Tax with VAT

Xing¹,

Bilicka²,

Hou³

2022

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In this paper, we investigate distortions created by turnover taxes. As a natural experiment, we explore a reform that replaced turnover taxes with value-added taxes for some service industries in China, while the taxation of manufacturing industries remained unchanged. The reform increased sales, R&D investment, and employment for affected service firms, which is primarily driven by outsourcing from downstream manufacturing _rms. We document that smaller and less innovative manufacturing firms outsource more, and reallocation increases the quality of innovation for affected service firms. Our study provides new evidence on the negative impact of turnover taxes imposed on business inputs.

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Section: Contemporary Policiesmentioning

confidence: 99%