Structural Tax Reduction,Debt Financing And Investment Efficiency

At the end of 2008,in order to cope with the severe impact of the global financial crisis on China’s economy,China carried out an active fiscal policy aimed at ‘expanding domestic demand and ensuring growth’ and a moderately loose monetary policy.As a significant part of active fiscal policy,policy of structural tax reduction has played a positive role in adjusting the economic structure,expanding consumption,promoting employment,encouraging investment and so on,which made a great contribution to the stable and rapid development of China’s economy under the impact of financial crisis.The structural tax reduction is a tax reform plan with the characteristics of ‘Increasing and decreasing,structural adjustment’,which takes the decrease of taxpayers’ substantial tax burden as a starting point to achieve the goal of optimizing the structure of the tax system,changing the development mode of economy and promoting the increase of economy.Policy of transformation from business tax to VAT is an important part of structural tax reduction policy,at the same time,it is an important move in China’s history of tax reform.During the one year of pilot project of transformation from business tax to VAT,that is,from May 2016 to April 2017,the cumulative tax reduction of transformation from business tax to VAT reached 700 billion yuan,and the overall reduction rate was 22.85%,with a prominent tax reduction effect.The tax reduction bonus released by the full implementation of the policy of transformation from business tax to VAT is beneficial to decrease the corporate production and operating costs and promote the corporate change of ‘removing deficiency and realizing reality’,which benefits to stimulate market vitality and correspond to the urgent demand of ‘three eliminations,one reduction and one supplement’ of the structural reform of supply-side.Investment is the main impetus of promoting the development of China’s macro economy,also the important guarantee to enhance the corporate value and realize the sustainable development.However,under the rapid growth of China’s investment at the macro level,the corporate inefficient investment phenomenon at the micro level is ubiquity.The corporate inefficient investment not only causes the waste of social resources,but also damages the wealth of shareholders,hinders corporate benign development,even influences the increase of national economy.The policy of structural tax reduction exerts an important influence on corporate specialization division of labor,labor employment,investment of fixed asset and other decision behaviors through various methods such as tax rate adjustment,tax type change,tax preferential policies and so on.Then,as a representative policy of structural tax reduction,can the policy of transformation from business tax to VAT exert impact on corporate investment structure? Can this impact bring the change of corporate investment efficiency? As an important source of investment,which kind of mechanism does the debt financing play in it?Therefore,from the perspective of tax system reform,based on the principal-agent theory,information asymmetry theory and financing priority theory,the paper selects A-share listed companies in Shanghai and Shenzhen from 2008 to 2017 as the research objects,at the same time,it utilizes the research methods of double difference model and multiple linear regression to empirically test the change condition of corporate investment structure and investment efficiency caused by the step-down conduction of the policy of transformation from business tax to VAT in various provinces and cities in China.Furthermore,the paper also analyzes the influence of policy of transformation from business tax to VAT on corporate scale and structure of debt financing,and on this basis,the paper tests that debt plays an intermediary mechanism role in the relationship between tax reduction polity and corporate investment.Under the background of China’s special tax system,the paper utilizes data of listed companies in China to test the asset substitution hypothesis of debt to investment.Finally,the paper reaches the following conclusions:First,the implementation of the policy of transformation from business tax to VAT has prominently enhanced the corporate capital investment and R&D investment,and stimulated the corporate merger and acquisition behaviors,but the increase of corporate investment has also brought about the decrease of corporate investment efficiency and more serious corporate over-investment.Internal heterogeneity of enterprises and the differences of external environment have a regulating effect on the above research conclusions,which is specific in that after the implementation of the policy of transformation from business tax to VAT,R&D investment and possibility of merger and acquisition of non-state-owned enterprises have been greatly improved,while there is no prominent change in state-owned enterprises;but in terms of investment efficiency,the inefficient investment and over-investment of state-owned enterprises have a more prominent rising trend than those of non-state-owned enterprises.The reason is that the government support of state-owned enterprises makes them face relatively small financing constraint,while the intervention of local governments also make the investment decisions of state-owned enterprises always with some political aims.In addition,we also find that the high-level corporate governance is able to significantly control the decline of investment efficiency caused by tax reduction.And the relationship between the policy of transformation from business tax to VAT and possibility of merger and acquisition is also influenced by regional institutional efficiency differences.Compared with regions with low institutional efficiency,the promoting effect of policy of transformation from business tax to VAT on possibility of merger and acquisition in regions with high institutional efficiency is more prominent.Second,the implementation of the policy of transformation from business tax to VAT makes corporate total debt level significantly improved,manifesting as the decrease of current liability level and the increase of long-term debt level in terms of debt structure,which verified the ‘substitution effect’ and ‘income effect’ between debt tax shield and non-debt tax shield and explained that the policy of transformation from business tax to VAT has lever effect,but this effect is just embodied in the current liabilities.Through the hypothesis of ‘state of tax loss’,it is found that when the pilot enterprises are close to the ‘state of tax loss’,the descent degree of current liabilities is greater.With the further consideration about the influence of corporate heterogeneity on research results,it is found that the influence of the policy of transformation from business tax to VAT on corporate debt financing is only embodied in non-state-owned enterprises,which is because that the government support of state-owned enterprises enables them to own relatively sufficient operating cash flow,so the non-debt tax shield effect of tax reduction policy on state-owned enterprises is hard to embody.Compared with smaller enterprises,the negative impact of tax reduction policy on current liabilities and the positive impact on long-term liabilities are more prominent in larger enterprises,which may be because that the financing capacity of larger enterprises is stronger,financing constraint level is lower,and larger enterprises have higher investment demand,need more long-term debt funds to ensure the subsequent expenditures of investment.Compared with low-financing-constrained enterprises,the decline of current liabilities in high-financing-constrained enterprises is more prominent,which lies in that the examination and approval requirements of long-term debt financing is stricter,and the demanded funds of production and operating for high-financing-constrained enterprises rely more on current liabilities.Third,the debt level and debt structure play some mediation on the influence of the policy of transformation from business tax to VAT on corporate capital investment,R&D investment,investment efficiency,and over-investment,verifying the asset substitution hypothesis between debt and investment,which is specified in that after the implementation of the policy of transformation from business tax to VAT,there is the decrease in corporate current liabilities and the increase of long-term debt,and the combined action of these two brings about the significant improvement of corporate capital investment and R&D investment,causing the increase of corporate inefficient investment,but one of the reasons of more serious over-investment phenomenon after the implementation of the policy is the growth of corporate long-term debts.The further analysis of Intermediary mechanism of the policy of transformation from business tax to VAT on the possibility of merger and acquisition verifies the influencing path of ‘tax reduction policy-financing constraint-corporate merger and acquisition’.In summary,under the policy background of structural tax reduction and the structural reform of supply-side,the paper provides a new thinking for the exploration of tax reform on corporate investment behavior,which has a significant enlightenment: from the perspective of enterprises,the managers should make efforts to cultivate their own awareness of investment planning,enhance corporate management level and suppress the occurrence of inefficient investment with good corporate governance environment;from the perspective of government,the government should accelerate the transformation of functions,strengthen the supervision of state-owned assets,support state-owned enterprises to improve investment efficiency on the basis of guaranteeing the maintenance and increase of value of state-owned assets,at the same time,the government should also increase financial and tax preference to further promote the corporate merger and acquisition;from the perspective of creditors,they should pay attention to the examination of corporate loan applications,make detailed and rigorous credit contracts,strictly abide by contract requirements to carry out the supervision rights on enterprises,fully play the governance role of debt on corporate investment and alleviate the phenomenon of corporate over-investment.