Incomplete VAT rebates to exporters : how do they affect China's export performance?
AbstractDuring the last decade, the Chinese government has frequently changed the value added tax (VAT) refund levels offered to exporters. Indeed, China's VAT system is not neutral, in particular because the exporters may not receive complete refund of the domestic VAT paid on their inputs. This paper investigates how changes in the VAT rebates affect export performance in China. Our empirical analysis relies on export volume data at the HS6 product level over the 2003-12 period. To address potential endogeneity, we exploit an eligibility rule that disqualifies processing trade with supplied materials from the rebates. We find that the adjustments to the VAT rebates have significant repercussions on the exported volume: a one percentage point increase in the VAT rebate can lead to a 7% increase in export volumes. This magnitude allows to better understand the strong resistance of China's exports amid the global recession.
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Bibliographic InfoPaper provided by CEPII research center in its series Working Papers with number 2014-05.
Date of creation: Feb 2014
Date of revision:
VAT system; Export tax; Export performance; China;
Other versions of this item:
- Gourdon, Julien & Monjon, StÃ©phanie & Poncet, Sandra, 2014. "Incomplete VAT rebates to exporters : how do they affect China's export performance?," Economics Papers from University Paris Dauphine 123456789/13784, Paris Dauphine University.
- F10 - International Economics - - Trade - - - General
- F14 - International Economics - - Trade - - - Empirical Studies of Trade
- O14 - Economic Development, Technological Change, and Growth - - Economic Development - - - Industrialization; Manufacturing and Service Industries; Choice of Technology
This paper has been announced in the following NEP Reports:
- NEP-ACC-2014-03-08 (Accounting & Auditing)
- NEP-ALL-2014-03-08 (All new papers)
- NEP-INT-2014-03-08 (International Trade)
- NEP-PBE-2014-03-08 (Public Economics)
- NEP-TRA-2014-03-08 (Transition Economics)
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