In:
The Journal of the American Taxation Association, American Accounting Association, ( 2023-09-01), p. 1-28
Abstract:
This study provides evidence of the relationship between adopting a value-added tax (VAT) and corporate income tax avoidance. Our analysis exploits the staggered replacement of retail sales tax with VAT in China between 2012 and 2019. Based on a sample of 6,948 firm-years, we find that firms affected by the VAT reform are associated with an increase in their book (cash) effective income tax rates by 1.4 (2.2) percentage points. Such an effect is more pronounced among firms that make the most of their sales to businesses than individuals and among those that are located in regions with low social trust and tax enforcement levels. Additional test results show that changes in ETRs are not mechanically driven by changes in sales and costs and consumption taxes brought about by the reform. While aiming to eliminate double taxation, the VAT reform generates a positive externality for income tax collection. JEL Classifications: H25; H26; K42.
Type of Medium:
Online Resource
ISSN:
0198-9073
,
1558-8017
DOI:
10.2308/JATA-2020-046
Language:
English
Publisher:
American Accounting Association
Publication Date:
2023
detail.hit.zdb_id:
2094578-4
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