Study On The Influence Mechanism Of Enterprise Tax Burden On Employee Compensation

Common prosperity is an essential requirement of socialism and an important feature of Chinese-style modernization.Since the 18th National Congress of the Communist Party of China,China has made solid progress in promoting the policy of common prosperity.China has already completed the building of a moderately prosperous society in all respects by 2021,and the Central Economic Work Conference at the end of 2021 once again emphasized preventing income polarization.Considering that tax is an important means for the government’s macro-control,China has been deepening the reform of the tax system in recent years,with a clear tax-reduction orientation and reducing the tax burden on enterprises.In the process of reducing the actual tax burden of enterprises,whether employees can benefit from it and realize the original intention of tax secondary distribution is the focus of this paper.Firstly,based on the review of literature,this paper makes a theoretical analysis on the mechanism of tax burden affecting employee compensation.Through the establishment of negotiation models between different skill groups and enterprises,the influence of tax on wages is divided into the part of profits generated by workers through negotiation(direct influence);And changes in taxes lead to adjustments in other input factors or input prices,which in turn lead to changes in wages(indirect influence).Finally,it is found that for a given factor input level,the increase of enterprise tax burden will lead to the decline of the rent wage shared by the skill group,thus having an impact on the overall wage.After that,by referring to the wage decomposition method proposed by Xie et al.(2019),and by introducing bargaining behavior between enterprises and employees,the profit sharing part and the wage of skill component of enterprise employees are estimated in the absence of skill component data of enterprise employees.Secondly,this paper selects the relevant financial data of all A-share listed companies in China from 2015 to 2020,and adopts the two-way fixed effects model to conduct empirical test.Estimate found that enterprise tax burden has a significant negative influence on employee compensation,a 1%drop in corporate tax burden,employee compensation rose 0.266%,this conclusion remains robust after a series of tests,such as systematic GMM,instrumental variable method,substitution of explained variables,exclusion of macro factors effects,placebo test and quantile regression.Heterogeneity results further show that,from the perspective of the nature of equity,compared with non-state-owned enterprises,state-owned enterprises are more affected by the reduction of tax burden;From the perspective of different life cycle of enterprises,compared with the start-up and growth stage of enterprises,the decline of tax burden of enterprises in mature stage and declining stage is more significant;From the perspective of enterprise technology level,high-tech enterprises are less affected than non-hightech enterprises.Thirdly,the salary decomposition method described in the theoretical analysis part is used to decompose employee compensation into skill component and profit sharing component.According to the decomposition results,the proportion of skill-based wage in employee compensation gradually decreases,while the proportion of profit-sharing wage keeps rising.On this basis,the mediation effect model is established to identify the influence mechanism of the actual tax burden on employee compensation.The results show that profit-sharing wage plays a complete mediating role in the impact of corporate tax burden on employee compensation,while skill-based wage has no significant mediating effect.This shows that the impact of corporate tax burden on employee compensation is entirely through profit-sharing wage,and the enterprise is willing to share part of the profits gained from the reduction of tax burden to its employees.The moderated mediating effect model results further found that,for the positive effect of profit-sharing wage on employee compensation,the increase of per capita profit played a promoting role;Moreover,when the per capita profit of an enterprise exceeds a certain threshold value,the increase of employee salary and profit-sharing wage caused by the decrease of corporate tax burden will increase with the increase of per capita profit.Finally,this chapter summarizes the main conclusions of the whole paper and puts forward targeted policy suggestions from the enterprise level and the government level respectively,in order to better realize the original intention of tax incentives.