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Tax integrity and innovation output: evidence from China

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  • Xiaoyun Gong
  • Wanyi Chen
  • Xiaolin Gong

Abstract

This study examines the relationship between firms’ tax integrity and innovation output. Using the tax credit ratings disclosed by the Chinese State Administration of Taxation as a measure of tax integrity, higher tax integrity is found to be associated with higher innovation output. This result is primarily achieved through the external resource mechanism, including increased credit funds, more trade credit financing, and reduced financing costs. A cross-sectional analysis shows that the impact of tax integrity on corporate innovation output is greater among firms with a poor law environment and a strong corporate tax avoidance motive. This study expands the literature on the factors influencing corporate innovation by investigating a new dimension of tax integrity that demonstrates the economic consequences of corporate integrity. Furthermore, this study provides guidelines for governments on how to enhance the tax credit rating system and improve indicator judgment and disclosure mechanisms, thus further promoting corporate innovation.

Suggested Citation

  • Xiaoyun Gong & Wanyi Chen & Xiaolin Gong, 2026. "Tax integrity and innovation output: evidence from China," Accounting Forum, Taylor & Francis Journals, vol. 50(3), pages 618-645, May.
    • Handle: RePEc:taf:accfor:v:50:y:2026:i:3:p:618-645
    DOI: 10.1080/01559982.2025.2529074
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