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The impact of VAT revenue sharing on corporate investment: Evidence from China

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  • Xue, DouDou
  • Ma, Yongxin
  • Zhang, Xuanrui
  • Song, Zhuo

Abstract

This paper uses a sample of China A-share industrial listed companies from 2012 to 2020. Based on the China’s 2016 50:50 value-added tax (VAT) revenue sharing reform, it constructs an intensity-based difference-in-differences (DID) model to analyze the impact of VAT revenue sharing on corporate investment. We find that an increase in the VAT sharing ratio significantly expands corporate investment scale, demonstrating a pronounced investment promotion effect. Mechanism analysis shows that credit support is the key channel, and VAT revenue sharing incentives promote corporate investment through this channel. The regression results remain robust after a series of tests including replacing the dependent variable. Heterogeneity analysis shows that the impact of VAT revenue sharing incentives on corporate investment is more significant in regions with high fiscal pressure and non-SOEs. This research proposes a new explanatory framework for corporate investment behavior from the perspective of tax decentralization. It provides practical references for optimizing sub-provincial VAT revenue sharing mechanisms and guiding rational corporate investment.

Suggested Citation

  • Xue, DouDou & Ma, Yongxin & Zhang, Xuanrui & Song, Zhuo, 2025. "The impact of VAT revenue sharing on corporate investment: Evidence from China," Finance Research Letters, Elsevier, vol. 85(PB).
    • Handle: RePEc:eee:finlet:v:85:y:2025:i:pb:s1544612325012267
    DOI: 10.1016/j.frl.2025.107968
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