The Effect Of VAT Rate Reduction On Corporate Tax Compliance

In recent years," reduction of tax and fee " has been the main focus of the national tax reform.However,due to the strong implementation of " reduction of tax and fee ",numerous preferential provisions,and the short implementation time,it is difficult to extract sample data,and the research on various aspects of " reduction of tax and fee " is not complete.However,clarifying the impact of each measure on society is helpful to make an accurate assessment of the effect of " reduction of tax and fee " and provide reference data for making similar reforms in the future.In this paper,we analyze the micro effects of the "VAT rate reduction" reform in terms of corporate tax compliance.This is an evaluation of the effect of past policy implementation and a reference for future policy formulation and implementation.This paper focuses on analyzing the impact of the two VAT rate reductions on May1,2018 and April 1,2019 on corporate tax compliance.In order to reduce interference from other policies,the data of one year before and after the implementation of the policy,i.e.,all listed companies in Shenzhen and Shanghai in China for the three years of 2017,2018 and 2019,respectively,are selected as the research samples,and the samples are screened and processed to finally obtain 5604 observations.Drawing on existing studies and combining with the actual situation in China,this paper selects DDBTD as the explanatory variable to measure the degree of corporate tax avoidance and corporate tax compliance.Meanwhile,this paper controls a series of variables such as company size,board size,enterprise nature,asset-liability ratio,total assets net interest rate,total assets turnover rate,and total profit growth rate to reduce the influence of other factors on the research results.After that,this paper investigates the aggregate effect of corporate tax compliance before and after the VAT cut in 2018 and2019 and the independent effect of each cut by constructing a multi-period DID model and two DID models.To strengthen the credibility of the findings,robustness tests were conducted by replacing the explanatory variables,replacing the study sample,and PSM-DID.The final results of the study found that VAT rate reduction increases corporate tax compliance,and the larger the VAT rate reduction,the higher the corporate tax compliance.In order to further improve VAT tax neutrality and bring into play the significant role of VAT in regulating the economy,the tax authorities and the government can reform VAT in the following ways:(1)simplify and merge VAT rates,improve the efficiency of input and output tax credits for enterprises,and reduce the distortion of input prices for intermediate links;(2)open up the credit chain between small-scale taxpayers and general taxpayers;(3)lower the VAT input tax The threshold of retained tax refund.In terms of improving enterprises’ tax compliance,tax authorities can(1)improve the professional capacity of tax officers;(2)strengthen supervision and management of enterprises.There are two possible innovations in this paper:(1)starting from a small perspective to study the micro effects of VAT rate reduction;(2)grouping the research samples according to the VAT rates corresponding to the industries to which the enterprises belong and their main business.Theoretically,this paper provides a new perspective for studying corporate tax compliance,enriches the study of factors affecting corporate tax compliance,and expands the extensiveness of factors affecting corporate tax compliance.Likewise,it also enriches the study of the effect of VAT rate change and gives a brief reference to the subsequent related studies.In practice,this paper makes an assessment of the effect of tax reduction and fee reduction to provide referenceable data for making similar reforms in the future.