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Governance of tax incentives: An effectiveness and differential analysis based on the Chinese context

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  • Huang, Zhixiong
  • Lv, Lan
  • Yang, Ming

Abstract

The disordered and rampant local tax incentives have interfered with regular business competition and resource allocation. In China, the government has undertaken a new round of policy adjustment to comprehensively sort out and standardize tax incentives, trying to realign value-oriented tax competition among local governments. Thus, this paper examines the real effect of standardizing tax incentives using China's State Council Documents No. 62[2014] and No. 25[2015], with the measurement of abnormal tax burdens and abnormal fiscal subsidies. The result shows that this round of policy governance has maintained the steadiness of the overall tax burden and fiscal subsidy, and only abnormal tax burdens and fiscal subsidies have been reduced through structural adjustment; In addition, it has also taken into account the difference among regional economic development. The governance in the Midwest is generally lighter than in the East. Meanwhile, the effect of governance among different property enterprises has presented a reduced tendency as "state-owned enterprises – local state-owned enterprises – private enterprises".

Suggested Citation

  • Huang, Zhixiong & Lv, Lan & Yang, Ming, 2024. "Governance of tax incentives: An effectiveness and differential analysis based on the Chinese context," Finance Research Letters, Elsevier, vol. 60(C).
    • Handle: RePEc:eee:finlet:v:60:y:2024:i:c:s154461232301228x
    DOI: 10.1016/j.frl.2023.104856
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    References listed on IDEAS

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    1. Dharmapala, Dhammika, 1999. "Comparing tax expenditures and direct subsidies: the role of legislative committee structure," Journal of Public Economics, Elsevier, vol. 72(3), pages 421-454, June.
    2. Matthew D. Shapiro & Joel Slemrod, 2009. "Did the 2008 Tax Rebates Stimulate Spending?," American Economic Review, American Economic Association, vol. 99(2), pages 374-379, May.
    3. Sumit Agarwal & Chunlin Liu & Nicholas S. Souleles, 2007. "The Reaction of Consumer Spending and Debt to Tax Rebates-Evidence from Consumer Credit Data," Journal of Political Economy, University of Chicago Press, vol. 115(6), pages 986-1019, December.
    4. Saez, Emmanuel, 2004. "The optimal treatment of tax expenditures," Journal of Public Economics, Elsevier, vol. 88(12), pages 2657-2684, December.
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    Cited by:

    1. Wang, Jingzheng & Qin, Xiaoli, 2024. "Tax reduction incentive and corporate financialization," Finance Research Letters, Elsevier, vol. 62(PB).

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