THESIS:Corporate Income Tax Reform And Corporate Compensation

Compensation incentive is the theoretical and practical circles topic of common concern.Domestic scholars researched manager compensation from "the optimal contracting approach","managerial power approach",and "government regulation" three dimensions.In recent years,a few scholars began to focus on employee incentive problems.However,in the company's incentive compensation system in empirical studies,the tax policy of the "income distribution"effect on the compensation policy has not been widely appreciated in the company's incentive compensation system.In fact,compensation contract not only affected by the corporate performance,but also by a number of external tax policy.Corporate income tax as a tax adjustment of income distribution policy is an important driving factor on compensation contracts.A new "PRC Enterprise Income Tax Law" was adopted on March 16,2007.The new tax law amended deduction policy.The changes of tax policy released the "gap" on corporate executives incentive and employees incentive,this change will produce what kind of economic consequences of it?In view of this tax reform involves salary "cap deductible" policy cancellation,there is no similar foreign policy changes,and thus the change in corporate income tax for indepth observation of the impact of the company's remuneration policy provides a rare opportunity.This paper is the first to discuss how the detail policy of corporate income tax-labor costs tax deductible policies and corporate income tax rates-affect the corporate compensation policy from"wealth distribution,resource allocation"aspect,and whether it is an important factor in corporate compensation contracts.First,this paper examines how policies affect corporate employee compensation contracts.With the "deduction limit" policy cancellation,corporate wages of employee increased significantly.Compared to the limited corporation,not limited corporation improve even more significant.However,with the increase in wages,compensation performance did not significantly change the sensitivity,but decreased slightly.In addition,with the "deduction limit" policy cancellation,"tax occupation wage" phenomenon not exist any more.Second,this paper examines the effect of the corporate income tax on executive compensation.The results show "deduction limit" monetary policy inhibits executives monetary compensation contract,with the "salary cap" cancellation,corporate executives monetary compensation increased significantly,and the substitution of job consumption is also significantly increased.Different from the employee,with the "deduction limit" policy canceled,corporate executives compensation performance sensitivity also improved significantly.In addition,the corporate income tax rate for the inhibition of executive pay disappeared with the "deduction limit" policy canceled.Finally,this paper examined the effect of the corporate income tax on the internal pay gap between the manager ande employee.Due to the difference with the decline in after tax cost,the gap expanded with the "deduction limit" policy cancellation.Besides,the higher the tax rate,the wage differential expansion is more significant.This paper further analyzes the different nature of property rights on the corporate income tax credit policy and remuneration policies relations.This paper found that the compensation contracts of state-owned enterprises and non-state-owned enterprises vary different under the tax reform.This paper is not only provide the empirical evidence of the corporate income tax reform effect but also the first comprehensive analysis of the two specific corporate income tax policies'influence on the corporation employee compensation.In addition,this paper reveals that the corporate income tax plays an important role in the process of initial distribution of income to improve the level of employee compensation and enhance the welfare of the whole society from the micro perspective,this provide a theoretical basis for the relevant policy-makers.