Local Government-firm Collusion And Enterprise Tax Burden ——A Natural Experimental Study Based On The Merger Of National And Local Tax Administration

In the context of the Chinese style decentralization system,which combines economic decentralization with political centralization,local governments in China are engaged in fierce tax competition for economic development.On the one hand,central-local fiscal decentralization gives local governments more autonomy in revenue and expenditure.On the other hand,the political elite selection system with promotion assessment as the main feature encourages local officials to make efforts to create better economic performance.Tax authorities have certain administrative discretion and the administrative law enforcement flexibility and local tax administration is under the jurisdiction of local governments.Therefore,the local government can change the taxation,so that the enterprise tax behavior is affected by government associations,for example a substandard tax preferential and relax the tax collection,etc.However,the impact of China’s local governments on tax collection management behavior,with the implementation of new round taxation system reforms,it is gradually being weakened.Among them,the effect of the merger of national and local tax administration is probably the most obvious measure.Therefore,this paper attempts to study the impact of local government tax collection and management behaviors from the perspective of the merger of national and local tax administration.According to the existing literature,under the pressure of local governments in "economic tournaments" and "political promotion tournaments," local tax administration may engage in government-enterprise collusion.The vertical administration of the national tax administration and the territorial administration of the local tax administration will be different incentives,the effort of national tax administration will be higher than the local tax administration.Therefore,it can be expected that after the merger of national and local tax administration,the tax burden rate of enterprises originally collected by the national tax administration will be reduced under the administration of the former director of the local tax administration.After the merger of national and local tax administration,the tax burden rate of enterprises originally taxed by local tax administration has been increased under the administration of the former director of the national tax administration.Based on the panel data of A-share listed companies from 2014 to 2019,and combined with the manual compilation of 496 resumes of directors of tax bureaus,this paper uses DID method to empirically test the relevant hypothesis about the impact of the the merger of national and local tax administration on the corporate tax burden.The results show that with the progress of the merger of national and local tax administration,the directors of local tax administration have a negative effect on the actual tax burden rate of the part of taxes originally managed by the national tax administration,and the tax burden rate of enterprises originally collected by the national tax administration has decreased by 0.12% under the administration of the current director of local tax administration.The tax burden of the company is rising under the management of the current director of the national tax administration,and the rise is 0.39%.Further equilibrium trend test and dynamic effect analysis results support the above findings and verify the reliability of the empirical method.In addition,the results of robust tests,such as elimination of samples in 2018,and control of leadership change in provincial tax administration,remained unchanged.Finally,the heterogeneity analysis also shows that enterprises in the eastern region and large and medium-sized enterprises are more affected by the combination of state and local taxes.The above empirical results show that the merger of national and local tax administration will reduce the space for collusion between government and enterprises,and then have an impact on the tax burden of enterprises.From the perspective of academic contribution,this study can provide new evidence for how tax decentralization,especially the change of tax collection and administration power,affects the behavior of local governments.From the perspective of practical significance,this study systematically evaluates the effect of the major reform of the merger of national and local tax administration,and provides the decision-making basis for how to further deepen the reform of fiscal and tax system.Based on this,the paper recommends reforming existing performance appraisal mechanisms by improving the independence of tax systems,strengthening the monitoring of tax officials,improving the extension exchange system,establish multi-faceted supervision system,etc.