Tax Enforcement Standardization and Corporate Investment: Evidence from China

Against the backdrop of continuous tax system reform in China, the business environment for market entities has undergone significant transformation. This study employs the staggered implementation of Tax Administrative Penalty Discretion Benchmarks by provincial tax authorities since 2016 as a quasi-natural experiment. Using a sample of A-share listed companies from 2007 to 2021 and a multi-period difference-in-differences approach, we examine how tax enforcement standardization affects corporate investment. Our findings demonstrate that standardized tax enforcement significantly promotes corporate investment growth. Furthermore, from a government-enterprise relationship perspective, we examine in depth the heterogeneous effects across firms with different characteristics. The investment response is particularly pronounced for enterprises without political connections and non-state-owned enterprises, suggesting the reform has helped level the playing field. Overall, by constraining enforcement discretion and improving institutional predictability, tax enforcement standardization effectively optimizes the business environment and stimulates corporate investment. This study not only enriches the theoretical framework examining taxation-investment relationships but also provides valuable insights for corporate investment decision-making. Â