Tax uncertainty and corporate innovation output: evidence from China

Abstract

Tax incentives are an important driving force for enterprises to ease financing constraints and promote innovation. Current studies focus on the tax-reduction effect of corporate tax incentive policies, paying less attention to the tax uncertainty engendered by tax reform. This study explores whether the predictability of corporate tax burdens is a key restrictive factor in corporate innovation. It focuses on the impact of tax uncertainty arising from the tax reform process on enterprise innovation, proposing a multidimensional measurement method to identify corporate tax uncertainty. The results show that tax uncertainty significantly inhibits corporate innovation and that its influence channels operate mainly through corporate financing constraints and information transparency. Further heterogeneity analysis reveals that a better regional economic system environment, greater tax enforcement effort, and digital transformation can restrain the negative impact of tax uncertainty on enterprise innovation. These findings enrich the literature on the factors influencing corporate innovation behavior and extend the research on tax reform, providing an innovative perspective for interpreting enterprises’ tax burden. Furthermore, it offers practical implications for tax reduction reforms and guidelines for enterprise innovation.