An Empirical Study Of Relationship Between Government Subsidies And Enterprises Tax

Starting from the market economy reform and the thought of right separation, some local governments in order to play the significant role of advanced enterprise to result in the expansion effects and promote the development of new small business, or in order to attract more outside enterprises to invest more economic resource into their administrative region, they gave benefits to the enterprise in return for long-term economic development. At the same time, government subsidies as one kind of benefit to the enterprise give effect in the socialist market economy.As the development of China’s economy reform and the increase of government budget, local government’s power are also rising, markets and competition among different regions are increasing deepening, local government’s attitude toward enterprise changed positive. When the business circumstance of the listed companies goes worse, however, government subsidies as a non-recurring earnings get the attention of the enterprise, even becomes the important method of listed companies to keep financing function, maintain the company image and to carry out the assets reorganization.In the view of accounting, listed company could take government subsidies as profits and losses in the current period and put it into the account of current profits. According to many researches, they prove that government subsidies played important role to the enterprises, the influence of government subsidies to loss-making enterprises is immediate.This article will study of correlation between government subsidies and enterprise paid tax. First, the research background, research objective, research significance and research organization of this article will be introduced. In the following, this paper will review the existing research in the field of government subsidies. At the background of China’s socialist market economy and government’s macro-control role, this paper will also review the game relation between central government and the local government, the rent-seeking behavior of enterprise to the government and the equity theory.In this paper, three hypotheses will be put forward. Hypothesis1assumes that there is a significant positive relationship between government subsidies and enterprise paid tax. The more the enterprises pay taxes to the government, the more government they will obtain. Hypothesis2assumes there is negative relationship between government subsidies and enterprise paid tax. The less the enterprises pay taxes to the government, the more government they will obtain. Hypothesis3assumes that government subsidies and tax have no significant relationship. Enterprise paid tax has no effect on the government subsidy they will get.By using the data of listed companies in Sichuan province to conduct empirical analysis, it shows that government subsidies and tax are negatively correlated in Sichuan province at present. Besides the phenomenon of high taxed enterprise seeking rent from government did not appear, or the encouragement of Sichuan government to enterprise is small. It also reveals that Sichuan government’s support to local listed companies usually goes to the small one.Finally through studying the empirical results, this article will put forward the problems this study and give suggestions to the following researchers.