R&D Expense Deduction Policy And Enterprises’ Strategic Response

The policy of deducting R&D expenses is an important tax incentive policy in China,but some enterprises may deviate from the original intent of the policy by strategically responding to the policy and capturing tax resources through R&D manipulation,which is not conducive to the real implementation of the preferential policy and the sustainable development of innovation activities.It is of great importance and value to study how to effectively curb the strategic measures taken by enterprises and make them fully effective as incentives.The existing literature has not reached consistent conclusions on the economic consequences of the R&D expense deduction policy,and it remains to be answered how to reduce the R&D manipulation triggered by the policy implementation process as a whole.This paper adds to the existing research by attempting to answer the question of how to better implement the R&D expense deduction policy from the perspective of tax collection and administration.The paper begins with a theoretical analysis of the mechanisms by which tax administration inhibits firms’ strategic responses to the policy,and examines the effects of heterogeneous factors such as the nature of firm ownership,the degree of industry competition and size.On the basis of the theoretical analysis,this paper takes the data of China’s A-share listed enterprises from 2008-2017 as a sample,takes into account the dynamic changes of the add-on deduction policy,constructs a multi-period DID model for empirical research,and draws the following research conclusions:(1)Overall,after the implementation of the add-on deduction policy for R&D expenses,enterprises’ motivation to respond strategically is obvious,and R&D manipulation increases significantly,while tax levy can(2)Compared to state-owned enterprises,the tax levy has a more significant inhibiting effect on non-state-owned enterprises’ strategic response to the R&D expense deduction policy;(3)Compared to enterprises with a lower degree of industry competition,the tax levy has a stronger inhibiting effect on enterprises with a higher degree of industry competition;(4)The tax levy has a more significant inhibiting effect on large-scale enterprises’ strategic response to the R&D expense deduction policy;(5)The tax levy has a more significant inhibiting effect on large-scale enterprises’ strategic response to the R&D expense deduction policy.(5)The mechanism test results show that tax collection and management can improve the quality of enterprises’ accounting information,and then inhibit enterprises’ strategic response to the super-deduction policy.Finally,this paper puts forward the following policy recommendations:(1)Further play the guiding role of the R&D expense deduction policy,continue to release tax reduction dividends,and continue to promote "mass entrepreneurship and innovation";(2)Improve the content of the R&D expense deduction policy,take into account the space for universality and differences and do a good job of analysis and evaluation of the policy implementation effect;(3)Make full use of modern technology such as big data to expand the breadth and depth of tax collection and administration,increase the penalties against tax fraud,improve the overall level of tax governance based on the new stage of "tax by numbers",and better implement the R&D expense deduction policy.