The Impact Of Tax Reduction Onemployment Absorption Byenterprises

Employment is the foundation of people’s livelihood,and ensuring the stability of employment in a country is related to the long-term prosperity of the economy and the stability and harmony of society.There is a close relationship between employment and economic development,and economic growth can effectively promote employment.The outbreak of the new crown epidemic at the end of 2019 has caused a certain impact on the development of China’s economy and society and has also brought a certain negative impact on the employment situation in China,and stabilizing employment has become a key concern for the country.SMEs are large and widely distributed and,given their importance in stabilizing employment,the government has introduced various measures to support the development of SMEs.Among the various initiatives,the tax reduction policy is particularly noteworthy.From 2014 to 2021,the scale of tax reduction and fee reduction in China exceeds 9 trillion,and the policy of tax reduction and fee reduction has become an important tool for the state to carry out macroeconomic management and regulation.In terms of the policy implementation effect,what kind of impact has the tax cut had on enterprise employment? Are there any differences in the employment effects of tax cuts on different enterprises? Based on the above questions,this paper tries to investigate the relationship between tax cuts and the employment of enterprises and provide empirical evidence for the state to improve the tax cut policy and promote and protect employment.In terms of theoretical analysis,this paper first collates and summarizes domestic and foreign literature,and puts forward two basic hypotheses based on relevant theoretical analysis:(1)Tax reduction can increase enterprise employment.(2)Expanding the scale of enterprise fixed assets is an important mechanism for tax reduction to increase enterprise employment.In terms of empirical analysis,this paper selects the data of listed enterprises in the small and medium-sized boards from2010-2021,constructs a fixed-effect model to empirically test the impact of tax reduction on enterprise employment,and further constructs a mediating effect model using the scale of enterprise fixed asset investment as a mediating variable to investigate whether there is a mediating effect of fixed asset investment scale.The study finds that reducing the tax burden of enterprises significantly increases the number of employees of enterprises,and this effect is achieved by expanding the scale of enterprises’ fixed assets.The heterogeneity analysis shows that the internal characteristics of the enterprise can cause a heterogeneous effect of tax reduction,and the larger the enterprise size,the stronger the management capacity,and the higher the degree of financing constraints it is subject to,the more significant the effect of tax burden reduction on enterprise employment promotion.The heterogeneous effect of tax reduction is also caused by the regional characteristics of enterprises.Compared with the central region,the tax reduction has a more significant effect on employment in the eastern,western,and northeastern regions;compared with the regions under greater fiscal pressure,the tax reduction has a more significant effect on employment in the regions under less fiscal pressure.Meanwhile,in terms of labor type,the effect of tax cuts on firms’ absorption of both skilled and unskilled labor is equally significant,and the increase in skilled labor does not come at the cost of crowding out unskilled labor.Based on the conclusions drawn from the above study,this paper puts forward the following policy recommendations: first,to ensure the continuity of tax reduction policies;second,to formulate differentiated tax reduction policies;third,to increase tax reduction for fixed asset investment;and fourth,to establish a regular tax reduction synergy mechanism.The innovation of this paper is twofold.First,this paper adds three-factor intensities directly related to the number of enterprise employment as control variables into the main regression model,excludes the influence of enterprises’ factor intensities on the scale of enterprise employment,and constructs a mediating effect model with the scale of enterprise fixed asset investment as the mediating variable to explore the transmission mechanism of the impact of tax cuts on enterprise employment,which improves the research content.Second,in the heterogeneity analysis,heterogeneity is analyzed in terms of intra-firm characteristics,firm geographical characteristics,and firm labor force types,which enriches the research perspective.