Study On The Impact Of Tax Incentives On The Employment Absorption Capacity Of Small And Medium-Sized Enterprises

"Stable employment" is a key pivot for "a stable economy" and "a stable society".To promote employment,the report of the 20th Party Congress made the important statement of "implementing the employment priority strategy,strengthening the employment priority policy,improving the employment promotion mechanism,and promoting high-quality and full employment".SMEs play a pivotal role in "stabilising employment" because of their large number and wide coverage.The stability of SMEs determines the stability of the job market to a certain extent.Today,over 70% of the world’s workforce is provided by SMEs.This shows that SMEs play a huge role in absorbing employment.However,against the backdrop of increasing downward pressure on the economy,many SMEs are facing problems such as heavy tax burden and difficulties in financing,making the development environment more difficult,which is not conducive to stimulating their potential in "stabilising employment".This paper attempts to explore the impact of tax incentives on the employment absorption capacity of SMEs from a micro perspective,and conducts heterogeneous analysis by industry and region to clarify the mechanism of the impact of tax incentives on the employment absorption capacity of SMEs,with a view to providing targeted policy insights on how to promote the healthy development of SMEs from the perspective of tax incentives to better play its "employment stabilization" role.In order to provide targeted policy insights on how to promote the healthy development of SMEs from the perspective of tax incentives to better play its role in "stabilising employment".To this end,based on a review of relevant literature at home and abroad,this paper firstly defines the concepts of SMEs,employment absorption capacity and tax incentives,and theoretically analyses the mechanism by which the tax incentives for SMEs affect labour demand.A panel of 329 small and medium-sized companies listed on the SZSE A-share from 2012 to 2021 was selected,with tax incentives as the core explanatory variable and the natural logarithm of the sample companies’ year-end active employees as the explanatory variable to measure their own employment absorption capacity,and a fixed-effects model was used to conduct an empirical study on the mechanism of the impact of tax incentives on SMEs’ employment absorption capacity.The study found that: firstly,there is a positive relationship between SMEs’ tax incentives and their own employment absorption capacity,and it is significant at the1% level,and the implementation of SMEs’ tax incentives has significantly contributed to their employment absorption capacity.Secondly,by industry,tax incentives for SMEs have a significant positive impact on their own employment absorption capacity in both service and manufacturing industries,and this positive impact is more significant for service SMEs than for manufacturing enterprises.This relationship is more significant for enterprises in the west than in the east and central regions.In order to ensure the reliability of the baseline regression results,the regression was conducted again by lagging both the explanatory and control variables by one period,shortening the year of the sample enterprises and changing the regression method,and the regression results were basically the same as the baseline regression results,which verified the robustness of the empirical results.Finally,relevant suggestions are made to summarise the analysis of this paper and combine it with the actual situation in order to improve the tax incentive policy.