A Study On The Impact Of Corporate Income Tax On Enterprise Investment

Since the reform and opening up,China remains a great economic growth story and has made remarkable achievements.Three carriages are undoubtedly the main force to promote rapid economic growth,and investment is one of the powerful engines.But in recent years,China's economy has shown a "new normal" status,the growth rate declined from high speed to mid-high speed,one of the performance is weak investment--fixed asset investment growth slowed down rapidly,there is particularly serious decline in private investment of fixed assets.Although the new normal is an opportunity to optimize the economic structure,but how to re-play the key role of investment in economic growth is also an important proposition.Stimulating investment often has a variety of options and paths,and adjusting tax policy is one of the important options.Whether from theoretical research or from the practical experience of developing the economy,the tax policy has long been an effective means of improving resource allocation,stimulating investment and adjusting the contradiction between demand and supply.In China's tax system,there's a direct and close relationship between enterprise income tax and enterprise development.Enterprise income tax accounted for a higher proportion in China's total tax revenue,so we need to pay more attention to enterprise income tax.Therefore,our research focus on how enterprise income tax burden affect the investment of the enterprise,and how much enterprise income tax burden can affect the investment of the enterprise,and whether the sensitivity of different enterprises'investment to enterprise income tax burden is the same.This paper first analyzes how enterprise income tax burden affect investment of enterprise.On the one hand,this paper use mathematical expressions to analyze the corporate income tax based on the neoclassical theory of taxation and investment,and came to conclusion that enterprise income tax influences investment from the tax rate,depreciation,investment credit and interest deduction.This mechanism is summarized as capital cost transmission mechanism.On the other hand,this paper divides the economic effect of enterprise income tax on investment into income effect and substitution effect.Enterprise income tax grabs a portion of the investment income and reduces attractiveness of investment,which forms a substitution effect.Income effect means that enterprises tend to carry out more investment activities to make up for this part of the loss.Ultimately the impact of enterprise income tax on investment depends on the balance between substitution effect and income effect.This mechanism is summarized as the game mechanism of two-way economic effect.According to the theoretical analysis,this paper presents four research hypotheses through the empirical analysis.This paper chooses the financial data of China's A-share listed companies from 2009 to 2015 as the research sample for regression analysis,and finally got four basic conclusions.In general,the corporate income tax burden has a negative impact on the investment of the enterprise.For the larger enterprises,raising the tax burden can stimulate the investment;for the smaller enterprises,raising the tax burden will curb the investment.For enterprises which has low tax burden,raising the tax burden can stimulate investment;for enterprises which has high tax burden,raising tax burden will inhibit investment.Compared to enterprises in eastern region,enterprises in central and western regions react more fiercely to corporate income tax burden in terms of investment.Based on these findings,this paper proposes some recommendations.