A Study On The Impact Of Business Tax Replaced With VAT Reform On Tax Avoidance

Since 1994,China has implemented a turnover tax system in which business tax and value-added tax have been implemented in parallel.With the transformation and upgrading of China's economy,a series of problems with duplicate taxation brought by the two-tax parallel taxation system have become more and more prominent.Besides,adding up the advantages of VAT such as tax-neutrality and the promotion of division of labor and distribution of industrial chain,it is imperative to replace the business tax with VAT.In January 2012,the pilot program of Business Tax Replaced with VAT Reform was initiated from the transportation industry in Shanghai and some modern service industries,and was rapidly expanded to other eight provinces and cities such as Beijing in the second half year.In August of the following year,the reform was promoted to the whole country,and the film and television service industry was included in the reform industry.In 2014,the railway transportation industry and the postal industry,and the telecommunications industry participated in the reform in January and June respectively.In May 2016,the reform started the last battle.The construction industry,real estate industry,financial insurance industry,and life service industry that were originally within the scope of business tax were included in the reform.Until then,the pilot work of the reform had been basically completed.The implementation of the reform is of great significance to China's supply-side structural reform and fiscal and taxation reform,and plays an important role in China's industrial structure upgrading and high-quality economic growth.At the same time,the implementation of the reform also has an important impact on the behavior of the micro-subjects.The actual tax burden of enterprises,especially for small and mediumsized enterprises,has been significantly reduced after the reform.The division of labor and cooperation of industrial chain has been optimized,and the investment efficiency of enterprises has increased significantly.Since the 1980 s,scholars in the accounting field have begun to study corporate tax avoidance behavior.Business Tax Replaced with VAT Reform has provided an important exogenous event for the study of corporate tax avoidance.This paper proposes a three-factor theory of pressures,opportunities and excuses to theoretically analyze corporate tax avoidance behavior.In particular,these three factors have undergone significant changes before and after the reform.First of all,the pressure of corporate tax avoidance mainly comes from the financial pressure of enterprises.The reform has realized structural tax reduction,which has reduced the actual tax burden of enterprises.The financial and the tax avoidance pressure of enterprises has also decreased.Secondly,with the advancement of the reform,the situation of cross management of turnover tax has ended,and the efficiency of law enforcement by tax authorities has increased remarkably.Meanwhile,the chain of value-added tax deduction has become more complete,and the upstream and downstream enterprises of the industrial chain have been mutually restrained.Thus the opportunities for tax avoidance by enterprises have been significantly reduced.Finally,the reform has reached a certain degree of taxation fairness and taxation simplification goals,so that taxpayers no longer have excuses to carry out radical tax avoidance.In order to verify the conclusions drawn from theoretical analysis,this paper uses PSM and multi-point DID methods for empirical testing.The test results prove the conclusion of the theoretical analysis: the implementation of the reform has inhibited the tax avoidance behavior of enterprises.In order to further clarify whether the different types of enterprises change tax avoidance behavior to the same direction after the implementation of the reform,this paper tests from the two dimensions of internal control level difference and property rights difference.From the perspective of the difference in internal control level,the efficiency of the internal control mechanism largely determines the effectiveness of the implementation of the tax planning strategy.For enterprises with high internal control level,before the reform is implemented,it would be affected by the efficiency target and would make full use of various tax avoidance strategies to improve business performance.After the implementation of the reform,the gains from aggressive tax avoidance by means of manipulation of costs and income will be largely offset by the cost of tax violations.Therefore,enterprises with high internal control levels will instead adopt a compliance-oriented tax planning strategy.The degree of tax avoidance of enterprises with high internal control level is significantly suppressed compared with enterprises with low internal control level.From the perspective of the difference in property rights,non-state-owned enterprises can transform tax-saving income into shareholders' interests,then private benefits,and at the same time,non-state-owned enterprises are usually in competitive industries,and financial pressure is more significant.When the reform was implemented,corporate tax expenditures were significantly reduced,financial pressures were significantly reduced,and the tax avoidance behavior of non-state-owned enterprises was more significantly inhibited,taking into account possible tax violation costs.In order to understand the follow-up effect of the implementation of the reform,this paper also uses the dynamic analysis method to test.The study found that the policy effect in the two years after the implementation of the reform still had a significant continuation,indicating that the reform plays an important role in regulating the micro-enterprise tax compliance behavior for a long time.The article tests the robustness test by replacing the measure method of tax avoidance level,expanding the time interval of the experimental group sample and using the placebo test.It is found that the results of the practice test are still significant and effective.Based on the research results above,the main contributions of this paper are as follows: First,this paper enriches and expands the literature on corporate tax avoidance behavior.Based on the three-factor model,from the perspective of corporate income tax avoidance pressure,opportunities and excuses,make research on the important consequences of changes in the tax avoidance behavior of service industry enterprises after the implementation of the reform.It has revealed that the reform has changed the mechanism of tax avoidance behavior of enterprises by opening up the value-added tax deduction chain between the service industry and other industries,fair tax burden and improving the tax system.Second,this paper provides theoretical support and empirical evidence for the microeconomic consequences of the reform from a new perspective.The research shows that the reform has a spillover effect on the tax avoidance behavior of service enterprises,and on this basis,it verifies the differential impact of the factors such as the internal control level and property rights of the enterprise and the dynamic time effect of the formation of the reform policy.