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Does value-added tax reform in services accelerate enterprise upgrading? Micro evidence from China

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  • Fei Peng
  • Ling Wang
  • Xing Shi
  • Huaqing Wu

Abstract

This study investigates the impact of the value-added tax reform in services on enterprise upgrading during China’s transition. We found that the reform significantly accelerates the process of enterprise upgrading by using data on China’s listed companies from 2009 to 2017 and a difference-in-differences approach. Heterogeneous analyses show that the impact of the reform is mainly manifested in non-state-owned enterprises. We also find that quality upgrading (value-added) plays a dominant role, while the potential of total factor productivity is not fully exploited yet. Tax reduction, investment in innovation, specialization, and factor allocation are major pathways to achieving enterprise upgrading. These findings provide implications for transitional economies in promoting enterprise upgrading through tax incentives.

Suggested Citation

  • Fei Peng & Ling Wang & Xing Shi & Huaqing Wu, 2022. "Does value-added tax reform in services accelerate enterprise upgrading? Micro evidence from China," Applied Economics, Taylor & Francis Journals, vol. 54(9), pages 1093-1109, February.
    • Handle: RePEc:taf:applec:v:54:y:2022:i:9:p:1093-1109
    DOI: 10.1080/00036846.2021.1975029
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    Cited by:

    1. Jun Wang & Congcong Liu & Zhuan Xie & Guangjun Shen, 2024. "Tax incentives and corporate innovation: Evidence from China's value‐added tax reform," Contemporary Economic Policy, Western Economic Association International, vol. 42(1), pages 183-202, January.

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