Discussion Paper Details

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Title: The Dynamic Effects of Computerized VAT Invoices on Chinese Manufacturing Firms

Author(s): Haichao Fan, Yu Liu, Nancy Qian and Jaya Wen

Publication Date: March 2018

Keyword(s): economic development, Firm Growth, state capacity, taxation and technology

Programme Area(s): Development Economics and Public Economics

Abstract: This paper uses a balanced panel of large manufacturing firms to study the dynamic effects of computerizing VAT invoices on tax revenues and firm behavior in China, 1998-2007. We find that computerization explains 10.8% of cumulative VAT revenues and increases the effective average tax rate by approximately 9-12% in the seven subsequent years. The evidence suggests that the effects of computerization change over time: tax revenue gains are likely to be smaller in the long run. Meanwhile, firms reduce output and input, and increase productivity monotonically over time.

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Bibliographic Reference

Fan, H, Liu, Y, Qian, N and Wen, J. 2018. 'The Dynamic Effects of Computerized VAT Invoices on Chinese Manufacturing Firms'. London, Centre for Economic Policy Research.