Tax Reduction Policy Research Articles

ATTRACTING PRIVATE INVESTMENT IN PUBLIC-PRIVATE-PARTNERSHIP: TAX REDUCTION OR RISK SHARING

With the financial burden of government increasing, the Public-Private-Partnership (PPP) model has become an alternative method to develop public infrastructure. To efficiently promote the private sector to participate in PPP, making a proper incentive policy is critical for the government. This paper examined the effects of two governmental support policies, i.e., tax reduction and risk-sharing, on the investment decision of the private sector, and further compared the relative efficacy of these two policies. The results manifest that: first, both tax reduction and risk-sharing policies motivate private sector to invest earlier; second, although the capital structure decision of the private sector is free from the influence of the risk-sharing policy, the optimal debt level under tax reduction policy shows a U-shape relationship with the incentive ratio; third, when completion risk is large, there exists efficiency loss for total benefits of the project under the risk-sharing incentive policy. Besides, the efficacy of two incentive policies varies depending on the scenario. Firstly, given the same incentive ratio, the risk-sharing policy proves to be more effective than the tax reduction policy. Secondly, when considering the same level of incentive loss for government, tax reduction policy outperforms than risk-sharing policy in terms of efficacy. Thirdly, the efficacy of these policies also depends on the completion risk level: under small completion risk, risk-sharing policy is more effective, whereas under large completion risk, the tax reduction policy takes precedence. Based on these findings, some managerial insights that could assist government in formulating more effective incentive policies are proposed.

Evaluation of the Effect of Tax Reduction and Exemption Policies During the Epidemic

Evaluation of the Effect of Tax Reduction and Exemption Policies During the Epidemic

Analysis on the Influence of Tax Reduction and Fee Reduction Policies on Digital Development Level of Enterprises Based on AHP-DEMATEL

Since structural tax cuts were first incorporated into active fiscal policy in 2008, various tax breaks have been introduced. Based on the detailed enumeration of tax reduction policy measures, this study constructs an evaluation index system for the level of digital development of enterprises in terms of strategy implementation, operation status, technology level, and quality management. Then DEMATEL hierarchical analysis method and big data analysis method are used to analyse and determine the comprehensive influence degree of each index. Finally, this paper analyses the benefits and convenience brought by tax reduction and fee reduction to the digital development of enterprises and puts forward countermeasures and suggestions for the development of digital transformation of enterprises in the context of tax reduction and fee reduction. This study aims to put forward relevant countermeasures for enterprises to enhance their digital transformation and development capabilities.

Supporting Small and Medium-sized Enterprises to Resume Production During the Epidemic Effect Analysis of Tax Policy

At the beginning of 2020, the spread of COVID-19 brought a huge impact on China's national economy and social life. Sudden outbreak of SMEs daily production and management and future development suffered a heavy blow, SMEs into a very embarrassing plight. As an indispensable part of the national economy and a major participant in market economic activities, it is of great significance to help SMEs mitigate the impact of COVID-19 and promote their resumption of work and production is of great significance for the comprehensive implementation of the tasks of "stability on the six fronts" and "security in the six areas". Based on the global spread of COVID-19 epidemic, this paper reviews the tax and fee reduction policies issued by the central and local governments since the epidemic, analyzes the effects of the corresponding policies on the resumption of work and production of SMEs, and puts forward suggestions to further improve the effect of tax policies to support SMEs to tide over the difficulties and help their development.

From Tesla's Price Strategy to Reflects the Overall Industry Trends of Electric Vehicles in China

This essay explains and focuses on the decreasing price strategy Tesla has adopted in 2022 and 2023. The cost of lithium batteries has decrease in 2023. The demand for electric vehicles is still high, due to the global trend of lowering carbon footprint and the tax reduction policy in China. To increase sales, Tesla decided to decrease the selling price of Model 3 and Model Y, both designed for middle-level income customers. By analyzing the financial ratios, it is proved that the pricing strategy was successful, and Tesla could tolerate the failure if this strategy couldn’t work out in the long run. The electric vehicle market in China is becoming saturated. There will be a price war in the future, and many brands might disappear because of this. Tesla should retain its brand independence and spend more on research and development to further increase its market share. From Tesla's Price Strategy to Reflects the Overall Industry Trends of Electric Vehicles in China.

Tax Cuts Impact on the Economy from the Perspective of Debt and Exchange Rate

In September of 2022, the newly inaugurated British Prime Minister, Liz Truss, introduced an ambitious policy involving significant tax cuts to stimulate the economy swamped by the COVID-19 pandemic. Regrettably, her ambitious plan eventually led to financial insolvency and catastrophically impacted on the UK's economic growth. Through the rigorous examination and analysis of data, this article primarily attributes her failure to the absence of consumer confidence and the outflow of capital, which were consequences of the substantial currency devaluation caused by the surging government debt. Then, the article draws comparisons between the UK's tax cut and successful case studies from the United States and China, which effectively managed the side effects of expansive tax cuts or similar policies that led to substantial increases in government debt. The findings argue that tax reduction policies cannot yield favorable outcomes unless they are the US with global currency status or in nations like China which can largely eliminate the currency devaluation by a governmental control on exchange rates.

Big data Research on the Application of Tracking Policy Audit in the Implementation of Tax Reduction and Fee

Since 2018, chinese government have conducted tracking audits on the implementation of tax reduction and fee reduction policies, facing the challenges of insufficient audit resources and massive unstructured data storage. This article attempts to introduce big data technology into tracking audit policies. This article elaborates on the importance and urgency of tracking and auditing the implementation of tax and fee reduction policies. The impact of big data technology in the field of auditing on the tracking and auditing of the implementation of tax and fee reduction policies is also discussed. It is proposed that auditing agencies should apply big data technology to the tracking and auditing of the implementation of tax and fee reduction policies. And we also attempted to design an audit plan based on Neo4j graphical database technology, which includes audit objectives and scope, audit content and focus, specific big data audit steps and audit results. In response to the problems that hinder the application of big data technology, suggestions have been put forward to improve the standardization of the data process system, actively promote more efficient big data technology, and increase the training of big data audit talents.

Evaluation of Incinerator Performance and Policy Framework for Effective Waste Management and Energy Recovery: A Case Study of South Korea

Waste incineration is a crucial component of waste management as it is the final stage of circular utilization and the initial phase of disposal. Effective waste management prioritizes energy recovery from waste and substantial waste volume reduction while committing to minimizing air pollutant emissions, particularly nitrogen oxides (NOx). This study involves an in-depth analysis of operational data from 44 incineration facilities in South Korea spanning 5 years, supplemented by empirical measurements from 14 sites. This study aimed to assess three key aspects of these incineration facilities: (1) waste volume reduction characteristics, (2) energy recovery capabilities, and (3) NOx emission reduction performance. We examined how these elements interact within the policy framework governing incinerator management in South Korea. Quantitatively, incinerating 100 tons of municipal waste resulted in a gain of 338.7 m3 in landfill capacity and recovery of 637.5 GJ of energy in the form of heat or electricity. Notably, South Korean incineration facilities significantly extend the lifespan of landfill sites, aligning closely with the objectives of the South Korean Ministry of Environment’s “No More Direct Landfilling of Household Waste Policy”. This positive outcome is further reinforced by the “Incineration Tax Reduction Policy”, which incentivizes active efforts toward energy recovery during incineration. Our study provides decision-makers with valuable insights for achieving a harmonious equilibrium between environmental sustainability and resource utilization, thereby contributing to the continuous improvement of policies aimed at South Korea’s vision of achieving a circular economy.

Study on the Impact of Tax Reduction Policies on Total Factor Productivity of Manufacturing Industry in Sichuan Province under High-Quality Development

Study on the Impact of Tax Reduction Policies on Total Factor Productivity of Manufacturing Industry in Sichuan Province under High-Quality Development

The impact of tax reduction on enterprises' financialization-A quasi-natural experiment based on the reduction of VAT rate.

This study examines the influence of the reduction in value-added tax (VAT) rates in China during 2018 and 2019 on corporate financialization. By employing a difference-in-differences model and utilizing data from Chinese A-share listed companies between 2017 and 2020, we assess the effects of tax reduction policies. Moreover, it achieves this outcome through three main pathways: alleviating financing constraints, boosting fixed asset investment, and weakening corporate financial arbitrage motives. Further analysis demonstrates that the inhibitory effect of VAT rate reduction on corporate financialization is more pronounced for non-manufacturing companies, businesses reliant on the basic tax rate as their primary revenue source, companies with low intermediate input rates, and those with a strong ability to shift the tax burden. Additionally, debt financing costs play a crucial role in moderating the relationship between tax reduction policies and corporate financialization. The conclusions drawn from this study provide valuable empirical evidence that can contribute to the refinement of VAT reduction policies and the prevention and resolution of financialization at the micro-level.

Research on the Corporate Innovation Resilience of China Based on FGM(1,1) and Fuzzy-Set Qualitative Comparative Analysis Model

Over the past few years, the uncertain business environment has shaped the resilient development thinking of firms. Measuring and predicting innovation resilience plays a crucial role in fostering the sustainable development of enterprises. This paper used the entropy-weight TOPSIS model and FGM(1,1) model to measure the innovation resilience of companies based on an indicator system, covering aspects such as tolerance for factor scarcity, R&D safety, core technology self-sufficiency, and organizational change capacity. The results show that the MAPE of the FGM(1,1) model is 0.0136, which is lower than that of the GM(1,1) model, with the predicted annual growth rate of the resilience being −0.95% from 2020 to 2025. Consequently, the study investigated what policy configuration may improve innovation resilience using the fuzzy-set qualitative comparative analysis (fsQCA) model. It identified four policy configuration paths, of which the combination of a tax policy for an additional deduction of enterprise R&D expenses and an income tax reduction policy is an effective policy configuration. This research expands the application of the FGM(1,1) model and inspires managers to develop innovative policies to enhance corporate resilience.

Informal Cross-Border Trade in Africa: Operations, Policy, and Opportunities

Informal cross-border trade (ICBT) refers to the illegal activities of cross-border commerce conducted by unregistered small-scale traders. We seek to develop insights to understand the ICBT value chain and offer policy recommendations to successfully integrate it into the formal economy. Using a game-theoretic model, we analyze the operations and key market dynamics of ICBT. We analyze the policy implications of three representative UN directives: enhancing marginalized traders’ access to formal channels, reducing export tax rates for formal traders, and introducing an alternative simplified trade regime (STR) for informal traders. All three policies result in an increase in government proceeds when the inherent profitability of the formal or STR channels is sufficiently high. Furthermore, social welfare increases when the policies effectively balance wholesale price competition within the formal and informal channels. We apply our model to a case study based on Uganda’s agricultural exports over an 11-year horizon. The access enhancement policy is most effective in increasing government proceeds but least effective in improving the welfare of other participants. The tax reduction policy enhances traders’ profitability but sacrifices the welfare of farmers and government proceeds substantially. Finally, the STR acknowledgement policy results in the largest increase in profitability of marginalized traders and farmers but comes at the cost of government proceeds. This paper was accepted by Jay Swaminathan, operations management. Funding: This work was supported by the Institute of Management Research, College of Business Administration, Seoul National University. Supplemental Material: The data and online appendix are available at https://doi.org/10.1287/mnsc.2022.02479 .

The Impact of Tax Cuts on Exchange Rate Changes in The Context of High Inflation and High Debt: Evidence from The UK "Mini-Budget"

This research mainly focuses on the exchange rate fluctuations after the British government of Liz Truss announced to introduce the tax reduction policies, mini-budget. This budget covers the abolition of the highest 45% income tax rate, turning down the income tax and partial stamp duty, aiming to provide greater tax relief to the wealthy to encourage investment and consumption. Based on the SVAR, in the case of high inflation and high debt, tax reduction policies may further intensify the pressure of currency depreciation, leading to a significant decline in the exchange rate. In addition, this paper found that fiscal expenditures and inflation rate have significant and persistent impact on the exchange rate. The conclusion of this research emphasizes that the tax reduction policies in the context of high inflation and high debt will exacerbate the exchange rate fluctuations, which has important implications for policy makers and market participants. In the current highly unstable global economy, a deep understanding of the impact of tax reduction policies on the money market is crucial for stabilizing the economy and monetary system.

Empirical study on the impact of tax reduction on the development of Chinese green energy industry.

The implementation of tax reduction policies in China represents a significant and effective strategy. Accordingly, this strategy has been designed to facilitate the development of a green economy by establishing a market-oriented allocation system for environmental and resource elements, while simultaneously invigorating microeconomic entities. As the nation navigates towards the adoption of green, low-carbon production, and lifestyles, the role of clean and green energy emerges as a vital necessity. Therefore, to explain the impact of tax reduction policies on the green energy industry, this study collected and compiled financial indicator data from 100 listed companies in the green energy sector, utilizing the China Stock Market Accounting Research database (CSMAR) as a source for research samples. A Panel Vector Auto Regression (PVAR) model was employed to observe the effects of tax reduction policies on the energy industry, while the dosage effects Difference in Difference (DID) model was utilized to verify and supplement the findings. In summary, the findings of this study can be summarized as follows: firstly, tax reduction policies exert a positive impact on the green energy industry by effectively mitigating the financial cost burden on green energy enterprises, thereby reducing production expenses and amplifying their profitability. Secondly, such policies bolster the capital turnover rate of enterprises in the short term, thereby enabling augmented research and development investments, refining production efficiency, and enhancing competitiveness. Through rigorous analysis and demonstration, the research findings accentuate the stimulative and propulsive impacts of tax reduction policies on the flourishing development of the green energy industry. Furthermore, this study provides relevant fiscal and tax policy recommendations, thoughtfully derived from the research findings.

How do tax reductions motivate technological innovation?

The main approach to promoting high-quality development lies in fostering self-reliance and self-improvement in science and technology, as well as enhancing the technological innovation capabilities of enterprises. In the new stage of moving from imitation to innovation, tax reduction plays an important role in promoting enterprise technological innovation. This article uses the data of A-share listed companies from 2008 to 2019 to explore the mechanism of how tax reduction exerts its core role in innovation. The findings indicate that tax cuts have a stimulating effect on firms’ research and development (R&D) innovation. These results hold true even after accounting for tax evasion and R&D manipulation behaviors. The mechanism analysis reveals that the incentive effects of tax cuts are realized through financing, specialized divisions, and the creation of added value. Notably, the “financing effect” exhibits a path dependence among high-tech enterprises. Furthermore, in terms of tax preferential policies, the “R&D expenses plus deduction” policy demonstrates the most significant incentive effect, while the “15% tax rate preference” is less effective than initially anticipated. However, the combined effect of both policy types proves to be significant in promoting R&D innovation, thereby enhancing the impact of a single-policy approach. Nevertheless, a structural phenomenon regarding the incentive effect on the input and output sides is observed. Through empirical analysis, this paper not only presents fresh ideas for improving tax reduction policies and unleashing the potential of scientific and technological innovation, but also offers essential insights for facilitating technological catch-up and achieving high-quality economic development.

Direct Tax Burden, Financing Constraints, and Innovation-Based Output

Tax and fee reductions serve as pivotal instruments in the deepening of structural reforms on the supply side and constitute a significant element of China’s proactive fiscal policy. Although China’s tax regime encompasses both direct and indirect tax burdens, the direct tax burden directly impacts the operational costs of firms and remains non-transferable. As such, it holds significant influence over corporate growth trajectories. A decrease in the direct tax burden alleviates financing constraints for firms, subsequently reducing their exposure to business risks. Focusing on the innovative output capabilities of firms, this study analyzes A-share-listed companies on the Shanghai and Shenzhen stock exchanges from 2010 to 2021. It aims to ascertain the influence of direct tax burden reductions on innovation output within the tax and fee reduction framework. The findings indicate that lessening the direct tax burden ameliorates financing constraints, thereby enhancing a firm’s innovative output capabilities. A deeper analysis reveals that non-state-owned enterprises benefit more significantly from this dynamic than their state-owned counterparts, underscoring the potential for targeted tax and fee reduction policies to bolster enterprise innovation. Furthermore, the government should recognize enterprise differentiation and drive broader economic growth through tailored strategies. Notably, the positive impact of mitigating financing constraints on innovation is more pronounced in firms with suboptimal corporate governance structures. While this mechanism notably influences non-invention patent applications, its effect on invention patent applications is comparatively muted. Post-outbreak, the interplay between tax burdens and innovative outputs has intensified, becoming more pronounced than in pre-outbreak times.

Do Digital Technologies Support Entrepreneurship Growth? Evidence from Indonesian Muslim Women in Depok City

The main objective of this paper is to assess the impact of digital technologies on the entrepreneurial output of Muslim women in Indonesia. Using a questionnaire, we collected data from Muslim women entrepreneurs involved in digital entrepreneurship in Depok city. We applied multiple linear regression to analyze the data. We found that the use of e-commerce platforms and internet services affects positively the entrepreneurship growth of Muslim women in Indonesia. However, online payments have been found non-significant because of awareness of risk and security towards online payment system. One of the limitations of this research is the size of the sample. Obtaining data from Muslim women entrepreneurs was very difficult. Again, the case under study is limited to one country. Therefore, it is recommended for future research to use a large sample size and include more countries. Indonesian government should implement tax reduction policies in order to improve the growing sector of Muslim women entrepreneurs, which can help them to become empowered in society.

Does the value-added tax reduction policy promote a firm’s green innovation? Evidence from China

ABSTRACT Based on the quasi-natural experiment of the Notice on Policies Related to the Simplified Value-added Tax Rate in 2017, this paper constructs a difference-in-difference model to shed light on the impact of the value-added tax reduction policy on a firm’s green innovation and its potential mechanism. The results reveal that after the implementation of the value-added tax reduction policy, the green innovation level of firms affected by the policy shock has significantly improved, and this conclusion remains consistent after a series of robustness tests. From the type of firms’ green innovation, the enforcement of the value-added tax reduction policy spurs firms’ substantive green innovation, but has limited impact on firms’ strategic green innovation. The mechanism test finds that easing financing constraints is an important channel for tax reduction policies to affect firms’ green innovation activities. In addition, the analysis indicates that the positive effect of the value-added tax reduction policy on green innovation is more pronounced among firms with more government innovation subsidies, stronger human capital, and higher capital intensity.

Spatial spillover effect of China's tax and fee reduction policies on independent research and development evidence from dynamic Spatial Dubin analysis.

To test the driving effect of China's tax and fee reduction policies on independent innovation, we established a model of Dynamic Spatial Durbin (SDM) and introduced DMSP/OLS night lighting data and Malmquist productivity index for partial differential decomposition. We found that: (1) Affected by the tax and fee reduction policies, the local province tends to increase the level of independent innovation in the short term, while neighboring provinces tend to purchase and rely on foreign technology; (2) In the long term, the tax and fee reduction policies do not significantly increase the level of independent innovation in local and neighboring regions; (3) There is a strategic choice behavior of local government between political promotion incentives and promoting independent innovation; (4) The policy externality of tax reduction and fee reduction has a two-way feedback effect. We conclude that: (1) The spatial agglomeration characteristics of tax and fee reduction policies require the government to fully consider the local innovation and economic foundation, and break the resource endowment of administrative divisions; (2) The spatial feedback feature of the tax and fee reduction policies requires the government to focus on the two-way interaction of independent innovation in the adjacent regions, rather than just one-way assistance, imitation and learning; (3) The spatial lag characteristics of tax and fee reduction policies require the government to establish a accountability system or life-long system for innovative performance evaluation. Moreover, the study fails to provide causality evidence from the spatial agglomeration and spatial time-delay.

Do Increased Tax Base and Reductions in the Underground Economy Compensate for Lost Tax Revenue Following a Tax Reduction Policy? Evidence from Italy 1982 to 2006

We here examine the frequent claim that an increase in the tax base and a decrease in tax evasion will compensate for a loss in tax revenues caused by a lower tax level. Using a unique data set for the estimated underground economy in Italy from 1982 to 2006, we found that a loss in tax revenues equivalent to 1% of the GDP would be partly compensated by an increase in GDP of 0.55%. The compensation would come from 0.31% of the GDP increase and from 0.24% of the reductions in the underground economy. These results apply to an economy with a high tax level (>32%) and a high underground economy (≥25%). Applying a high-resolution lead–lag method to the data, we ensured that tax changes were leading the GDP and, thus, a potential cause for changes in the GDP.