Tax Sharing,Corporate Tax Burden And Total Factor Productivity Of Manufacturing Enterprises

The report of the 20 th National Congress of the Communist Party of China pointed out that “Pursuing high-quality development as our overarching task,we will move faster to build a modernized economy.We will raise total factor productivity,make China’s industrial and supply chains more resilient and secure,and promote effectively upgrade and appropriately expand China’s economic output”.Science and technology innovation is currently a key force for high-quality economic development.For this reason,the central and local governments are paying more and more attention to the improvement of total factor productivity of enterprises.The China’s tax allocation reform stabilized the fiscal relationship between the central government and local governments,and inspired local governments to promote economic growth.The local governments reduced the tax burden on businesses in order to increase their total factor productivity.This thesis firstly analyzed how tax sharing affects the total factor productivity of enterprises and the mediating role of enterprise tax burden based on the theories of fiscal decentralization,principal-agent and externality,and put forward research hypotheses.Second,it reviewed the evolution of China’s fiscal system over time and assessed the corporate tax burden and total factor productivity of manufacturing enterprises in China at this stage.On this basis,this paper made an empirical analysis by building a regression model of tax sharing and total factor productivity based on panel data of A-share listed manufacturing enterprises from 2011 to 2020.And further heterogeneity was analysed in terms of three aspects: ownership of the enterprises,high-tech enterprises and firm life cycle.Then,this thesis built a mediating effects model to explore how corporate tax burden plays a mediating role in the effect of tax sharing on total factor productivity of enterprises.The regression results were tested for robustness.The empirical analysis demonstrates that: The tax sharing has a significant role in promoting total factor productivity of businesses,and local governments support businesses by fostering favorable macro-innovation environments.By lowering the tax burden on businesses,tax sharing both directly and indirectly raises the level of TFP.Local governments lessen the tax burden on businesses through easing tax collection and enhancing tax incentives,which motivate enterprises to raise their levels of total factor productivity.The impact of tax sharing on an enterprise’s total factor productivity is highly heterogeneous.Enterprise identity,ownership and life cycle stage being critical determinants of the impact of tax sharing.The total factor productivity of high-tech businesses,state-owned businesses and companies in the maturation and decline stages can all be increased more effectively through tax sharing.The overall trend of changes in the corporate tax burden and total factor productivity of A-share listed manufacturing enterprises in China from 2011 to 2020 is consistent,with a general decline in the tax burden and an increase in the total factor productivity of the enterprises.Based on the aforementioned findings,the policy recommendations made by this paper are as follow.First,raise the percentage of local government’s tax share and improve the political performance evaluation system;second,optimize the fiscal structure of local government’s spending on science and technology,implement differentiated tax policies according to the characteristics of enterprises;third,further reduce corporate tax reduction;fourth,enhance businesses’ capacity for technological innovation and capital use efficiency.