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VAT rebates and export performance in China: Firm-level evidence

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  • Chandra, Piyush
  • Long, Cheryl

Abstract

A destination-based VAT system without a complete export tax rebate is detrimental to a country's exports, while an increase in the VAT rebate rate helps reduce the negative effects. In this paper, we study the role of VAT rebates in affecting Chinese exports using firm-level panel data for 2000–2006. To address potential endogeneity, we rely on a quasi-natural policy experiment in 2004, when the fiscal conditions of local governments became important in determining the actual VAT rebate rates for exports. The empirical findings demonstrate significant and large effects of VAT rebates on export volume. On average, for each percentage point increase in the VAT rebate rate, the amount of exports increased by 13%, which translates into an additional $4.70 of exports for each $1 of export tax rebates paid.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Public Economics.

Volume (Year): 102 (2013)
Issue (Month): C ()
Pages: 13-22

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Handle: RePEc:eee:pubeco:v:102:y:2013:i:c:p:13-22

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Web page: http://www.elsevier.com/locate/inca/505578

Related research

Keywords: VAT rebate; Export growth; Trade policy; China;

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References

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Cited by:
  1. Julien Gourdon & Stéphanie Monjon & Sandra Poncet, 2014. "Incomplete VAT rebates to exporters : how do they affect China's export performance?," Working Papers 2014-05, CEPII research center.

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