Abstract
The regulation of fiscal and tax policies is an imperative prerequisite for improving the regional innovation capability. In view of this, an attempt was made to select 31 provinces and cities in China as the research object from 2009 to 2018, to extract the fiscal and tax policy text encouraging innovation of the Chinese provinces and cities based on Python, and analyze their impact on regional innovation capability from both a text data and numerical data perspective. It is noteworthy that most of the provincial fiscal policies just follow the national fiscal policies. Each province does not formulate fiscal and tax policy according to its own unique characteristics. Fiscal policies and regional innovation capability exhibit significant spatial heterogeneity. Based on the results of the dynamic panel data model, it is seen that the R&D input and industrial structure are the main sources of improving innovation capability. The fiscal expenditure for science and technology, fiscal and tax policy text, macro tax burden, business tax (BT), and value-added tax (VAT) have a significant boosting effect on the regional innovation capability. However, the corporate income tax hinders the regional innovation capability. Finally, through the robustness test of invention patents, it is found that the fiscal and tax policy text, macro tax burden, and business tax still have a positive effect on invention patents, but the role of value-added tax has changed from promotion to obstruction, and the corporate income tax has become a significant obstacle on invention patents. This shows that China should build a tax system that promotes fair competition, reduce the tax burden of enterprises, encourage enterprises to conduct independent R&D, and guide enterprises in the evolution from the low-tech to high-tech innovation by improving the tax structure and fiscal technology expenditures.
Highlights
China has made unprecedented economic progress during 40 years of reform and open-up.Such economic prosperity, with low factor costs and high capital investment at the expense of economic growth mode, has resulted in serious ecological environment problems and restricted the upgradation of the Chinese economy
Xi Jinping, who has served as General Secretary of the Communist Party of China, clearly stated that some major disruptive technological innovations were creating new industries or new business model, and that information technology, biotechnology, manufacturing technology, and new material technology had penetrated into almost all fields at the 2016 National Science and Technology Innovation Conference
By comparing the effect of coefficients of various taxes in the current period and the lagging period, we find that the positive impact of macro tax burden on regional innovation capability becomes insignificant, and business tax has a significant role in promoting regional innovation capability
Summary
China has made unprecedented economic progress during 40 years of reform and open-up. Such economic prosperity, with low factor costs and high capital investment at the expense of economic growth mode, has resulted in serious ecological environment problems and restricted the upgradation of the Chinese economy. According to the Porter’s theory of the national innovation system, implementing an innovation-driven development strategy and vigorously advancing the scientific and technological innovation are strategic provisions for improving social productivity and overall national strength. Promoting innovative capability in firms should, become the cornerstone of economic. Governments around the world are broadening and deepening their support for innovation in the private sector and the economy in general. The average share is typically much higher in advanced economies (2% of GDP)
Sign-in/Register to view highlights & summary Sign-in/Register to access full text options 
Free) 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a call
