The Impact Of China’s Value-added Tax Reform On Firm Export

The reform of value-added tax(VAT)system has an important impact on economic activities.Each production and operation link of each goods needs to be taxed step by step according to the value-added in this link.Since the introduction of VAT in 1979,China’s VAT has involved a series of reforms.In 1993,the tax system was reformed,and the VAT became the focus of the reform.In July 2004,the pilot reform of VAT transformation from production type to consumption type was carried out,and in January 2012,the pilot reform of "replacing business tax with value-added tax"(BTTVAT)was carried out.After the policy of BTTVAT,the VAT still experienced several important changes,such as adjusting the applicable tax rate of VAT in some industries in 2018,adjusting the applicable tax rate of VAT in some industries in 2019 and the implementation of the VAT rebate system.The existing literature related to the VAT reform mainly focuses on whether the VAT reform reduces the tax burden of firms,improves the value of firms,improves the wage level of employees and promotes firm innovation.There is little literature on the impact of the VAT reform on firm’s exports.At present,China is facing the problem that comparative advantage industries are still concentrated in labor-intensive fields,and the export diversification level and export quality of firms need to be improved.Studying the impact of these important reforms on firm’s exports is of great significance for China to achieve the goal of maintaining export stability and improving quality and building a strong quality country.Based on the two important tax reform pilots of VAT transformation and BTTVAT,combined with the Annual Survey of Industrial Firms(ASIF)and China Custom Data(CCD),this paper uses the natural experiment composed of tax system reform to study the impact of these tax system reforms on the export of Chinese firms.Specifically,this paper is divided into four aspects to investigate the impact of China’s tax system on exports.Firstly,this paper studies the impact of VAT transformation on the export volume,including the impact on labor-intensive,capital and technology intensive firms,and focuses on the impact of VAT transformation on the export volume of labor-intensive firms.This paper also studies the impact of VAT transformation on the total export quantity and export types of firms.Secondly,this paper studies the impact of VAT transformation on the export quality of firms,including the impact on firms with different ownership properties and different fixed asset sizes,as well as the mechanism of VAT transformation affecting the export quality of firms.Then,this paper studies the impact of BTTVAT on the export volume of firms,including the impact on firms with different ownership properties,different profitability and different types of production factor intensive firms,as well as the mechanism of BTTVAT on the export volume of firms.This paper also studies the impact of BTTVAT on the export types of firms,including the impact on firms with different financing constraints and different profitability,and the mechanism of BTTVAT on the export types of firms.This paper also compares the mechanism of the impact of VAT transformation and the BTTVAT on the export volume of firms.Finally,this paper studies the impact of BTTVAT on the export quality of firms,including the impact on firms with different financing constraints,different proportion of intermediate inputs and different profitability,as well as the mechanism of BTTVAT on the export quality of firms.This paper also compares the impact mechanism of VAT transformation and BTTVAT on firm export quality.This paper mainly draws the following conclusions.First,this paper finds that the VAT transformation has a significant negative impact on labor-intensive firms.This negative impact comes from the reduction of export unit price caused by economies of scale and the increase of industrial output value in the domestic market when the total industrial output value remains unchanged.We further find that the VAT transformation has a significant negative impact on the export volume of non-state-owned enterprises(non-SOEs)and lower fixed assets firms.Second,this paper finds that the VAT transformation inhibits the upgrading of export quality of firms.This negative impact comes from the increase of fixed assets of labor-intensive firms,the decrease of industrial intermediate investment of labor-intensive firms and the decrease of per capita wages of firms.We also find that the VAT transformation has a significant inhibitory effect on the export quality of non-SOEs and firms with high fixed asset scale.Third,this paper finds that BTTVAT has a significant positive impact on the export volume of firms and a significant negative impact on the export types of firms.BTTVAT has a significant positive impact on the export volume of non-SOEs and firms with high profitability,and a significant negative impact on the export types of firms with high financing constraints and firms with low profitability.BTTVAT reduces the export types of firms by improving the level of production specialization,and increases the export volume of firms by expanding the scope of export tax rebate and tax reduction channels.Through mechanism comparison,we find that there is no conflict between the impact of BTTVAT and the VAT transformation on the export volume of firms.Fourth,this paper finds that BTTVAT has a significant positive impact on the export quality of firms.BTTVAT has a significant positive impact on the export quality of firms with low financing constraints,firms with high proportion of intermediate inputs and firms with profitability above 25%quantile.BTTVAT promotes the export quality upgrading of firms by improving the level of production specialization and the quality upgrading of imported intermediate products.Through mechanism comparison,we find that there is no conflict between the impact of BTTVAT and the VAT transformation on the export quality of firms.The innovation of this paper has the following aspects.In terms of research perspective,most of the existing studies focus on the impact of domestic economic activities,and rarely involve the open economic sector.From the perspective of open economic sectors,this paper brings the VAT transformation and BTTVAT into the same framework,and uses the natural experiment of VAT transformation and BTTVAT respectively to accurately identify the impact of VAT reform policy on firm exports.At the same time,comparing the mechanism of these two VAT reforms affecting firm export is conducive to a more comprehensive understanding of the path characteristics of the transformation of VAT tax system structure,which can provide research experience for the reform of other taxes in the future.In terms of research content,this paper has made a breakthrough on the basis of existing research.Based on two important pilot policies of VAT reform,this paper studies the impact of VAT transformation and BTTVAT on the export scale,export types and export quality of firms.In addition,in terms of research methods,in order to accurately estimate the impact of tax reform on export scale,export types and export quality,this paper uses two tax reforms as natural experiments to construct a difference-in-differences(DID)model,so as to reduce endogenous problems and parameter estimation bias.