The Inspection Of The Sales Tax Reform’s Policy Effects From The Perspective Of Capital Structure Adjustment

Sales tax reform firstly settled off on January1st in Shanghai and then extended to other provinces with the aim to reduce tax burden in the industry of transportation and modern service, adjusting the tax rate and its recruiting ways, which renders a thorough difference in tax structure. Up until now the reform has processed for two years, so it’s high time that we inspected its short-term effects.We’re going to inspect the change of capital structure and then the tax burden for those who have processed the reform indirectly through a caliber come up by classical theories of capital structure. Classical theories consider that a rise up in tax burden will lead to a rise in debt proportion of the total capital for the sake of tax-offsetting effects from the debt interest. Therefore, if we capture a dramatical rise up in debt proportion after the reform, which reflects a much heavier tax burden, then we can say the target of the policy has not been achieved yet.We set up a theoretical model, through which we analyzed the mathematical relationship among financial variables before and after the reform and then calculate the change of debt tax shield, by which we predict that the debt proportion will increase, which in turn tells a heavier tax burden after the reform; Meanwhile, we make a dynamic analysis of the new debt tax shield with a conclusion that after the reform the growth rate of the cost price and the average production could be utilized to arrange the new debt tax shield, which exists a theoretical maximum that however cannot be achieved in reality.Empirical studies are based on panel data from listed companies’quarterly financial reports and we find that the experimental industries significantly raised their total debt proportion while their short-term debt proportion decreased. We then take industry factor into account and get a deeper insight in the change of tax burden after the reform:firstly, only companies in logistics significantly changed its short-term capital structure; industries of logistics and warehousing significantly raised their proportion of liability with interest; all of the considered industries significantly raised their total debt proportion. So from the perspective of the present research, sales tax reform has not achieved its policy target yet.