Who Bears the Cost of Tax Digitalization? : Asymmetric Compliance-Cost Incidence of China's Fully Digitalized Electronic Invoice

We exploit the staggered, province-level rollout of China's Fully Digitalized Electronic Invoice (the Shu-Dian- Piao, or FDEI) between late 2021 and 2023 to identify how invoice digitalization affects firms' formal compliance costs and tax compliance, and-most importantly-how these effects are distributed across parties with different bargaining power. Using firms in regions that never opened an FDEI issuance pilot within the window as controls and the Callaway and Sant'Anna (2021) estimator, which is robust to heterogeneous treatment timing, we document three findings. First, on average, firms' administrative- expense ratio rises by about 0.26 percentage points after treatment, with no detectable pre-trend; audit fees, financial-expense ratios, and top-five supplier/customer shares do not change significantly. Second, the increase is highly concentrated: it is about 0.33 percentage points for non-state-owned firms and 0.40 percentage points for small firms, while it is insignificant for state-owned and large firms. Third, tax compliance, measured by book-tax differences, the Desai-Dharmapala residual, and effective tax rates, does not improve on average or in any ownership/size subgroup. The claim robustly supported by the data is therefore the asymmetric incidence of formal compliance costs toward weaker market participants-not the stronger claim that compliance improvement is "decoupled" from compliance costs. The evidence should be read as short-run and conservative, given the concentration of treatment in 2023, the short post-period, and nationwide spillovers from the separately rolled-out receipt side.