Abstract
The development of the automobile maintenance industry less developed to satisfy the increasing demand for automobile maintenance service as the automobile manufacturing industry increased rapidly in China. This is not conducive to the sustainable development of the automobile industry. Besides the factors of market behavior that can affect the automobile industry structure, like an investment, operation structure or economic development stage, the structure is also influenced by government intervention. We investigated the unbalanced development of automobile structure from the perspective of government incentives, and provide a logical framework for analyzing the industrial policies on the automobile industry. We first established a two-sector theoretical model with government intervention, and we found that the governments’ GDP incentive induced the biased intervention policy. More preferential policies are given to enterprises of automobile manufacturing industries as they contribute more to intermediate goods and capital. The greater the government’s GDP incentive, the more biased the intervention will be. Then we test the differential impact of GDP incentive on tax avoidance of the two kinds of firms empirically. The empirical results show that GDP incentive of the government induced more preferential treatment to automobile manufacturing enterprises, and thus, increased their tax avoidance. This phenomenon is more significant in SOEs, larger firms and firms belong to local governments. Understanding the incentive and implementation of industrial policy can help us know the evolution of automobile industrial structure better, and then improve industrial policy better to promote the transformation and upgrading of automobile industrial structure.
Highlights
The economic development process of various countries in the world shows that vehicle ownership gradually increases with the development of economy, especially GDP per capita [1]
The coefficient of the triple interaction term in Column (4) is −0.4934, which indicates that the negative effect of government incentives on firm’s tax burden is about 0.5 lower in the automobile manufacturing firms compared with the automobile maintenance firms
These results show that the phenomenon of the difference of intervention caused by government incentive is more apparent in large size enterprise, and the biased subsidies and preferential policies are given by the government to the automobile manufacturing industry are more likely to occur in large enterprises
Summary
The economic development process of various countries in the world shows that vehicle ownership gradually increases with the development of economy, especially GDP per capita [1]. The government can use different kinds of interventions, which take many forms, including explicit subsidies and bonus, such as research and development subsidies [37,38,39], but more of them are invisible, such as granting loan guarantees and loan preferences to enterprises to reduce their capital costs and financing constraints [40] Another example is effective tax rates, which can be affected by tax preference and taxation intensity so that a firm’s tax burden can be affected as well, the tax rate is legal [41,42]. This kind of intervention changes with government incentives and varies in different enterprises We found both theoretically and empirically that the governments’ GDP incentive induced the biased intervention policy on automobile manufacturing and maintenance industries.
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