Closing the information gap: Tax data sharing and small business finance

We examine the impact of government tax-data sharing on small business financing, leveraging a quasi-experiment from the staggered provincial rollout of tax-data integration at a major Chinese internet bank. The results show that tax-data integration significantly enlarges the credit lines offered by the bank. Small firms subsequently increase credit utilization, leading to higher sales and broader business networks, including more buyers and suppliers. Improved credit access also generates supply chain spillovers, raising upstream sales and downstream purchases independent of firms' own credit access. Our findings highlight that government tax-data sharing, by effectively reducing information asymmetry, significantly empowers fintech lending to advance inclusive financing for small businesses.