DP12786 The Dynamic Effects of Computerized VAT Invoices on Chinese Manufacturing Firms
|Author(s):||Haichao Fan, Yu Liu, Nancy Qian, Jaya Wen|
|Publication Date:||March 2018|
|Keyword(s):||economic development, Firm Growth, state capacity, taxation, technology|
|JEL(s):||H25, H26, O12|
|Programme Areas:||Public Economics, Development Economics|
|Link to this Page:||www.cepr.org/active/publications/discussion_papers/dp.php?dpno=12786|
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.