Income Tax Incentives And Competitiveness Of Enterprises

In the context of the "New Normal",in response to the slowdown in economic growth,the Central Economic Work Conference held at the end of 2015 proposed to promote the structural reform of the supply side,improving the quality and efficiency of the supply system,improving the overall level of social productive forces and improving the effective supply capacity,Try expand consumer demand with the creation of new supply and improvements of supply quality,(Wang Jianing,2015).The government's tools for economic regulation are mainly fiscal and monetary.The reality is that there is a high leverage ratio,and credit expansion may continue to flow to those industry that are excessed,matured and aged.Compared to the conventional monetary policy,the fiscal policy may be a better choice.In the end of 2015,the central economic work conference proposed to implement the tax reduction policy to reduce the burden of corporate taxes and fees.In October 2016,the State Council issued " Guidance on Reducing Corporate Leverage “,which required a better role play of the government,required to implement and improve the policy of reducing leverage of finance and taxation,and required to effectively reduce the social burden of enterprises,and proved appropriate financial support to encourage and guide the enterprises to reduce the leverage ratio according to the realistic requirement.It can be seen that government intervention has begun to establish tax cuts as the main content of the fiscal policy.Compared to tax reduction,the lending is kinds of blood transfusion treatment which is clearly much worse.Tax cuts help to reduce the leverage of enterprises,but also give the enterprise endogenous self-recovery and growth capacity.Tax cuts to reduce the cost of tax constraints and the burden on enterprises,so that enterprises have enough funds and energy to start to improve the quality and efficiency of the supply system,and help to improve the total factor productivity,and can absorb the employment from the obsolescent industry,and also help to stimulate investment and consumer vitality.To a certain extent,tax cuts can fully and fairly release economic resources to the market,creating new "unbalanced" opportunities in the original economic landscape,thereby improving the efficiency of the economy as a whole.In general,the reduction of corporate tax costs to release the enterprise financial resources,can increase the company's retained earnings for enterprises to improve management and organizational structure,retain staff,price promotions,expand the market,update equipment and processes,absorb intellectual property,provide space to innovation and create,which has a very positive significance on promoting the supply side of the reform smoothly.In this context,this paper studied the relationship between income tax incentives and the competitiveness of enterprises from the perspective of reducing the cost of corporate income tax.In simple terms,this article is concerned with the fact whether income tax incentives can encourage enterprises to maintain or even increase productivity,the level of technology and innovation(in this paper,total factor productivity,intellectual property,R & D investment and new patents are used to describe the variables above)while enjoying income tax benefits.Because it requires a lot of investment for enterprises to maintain or even increase their competitiveness,so though enterprises have additional financial benefits via income tax incentives,there are incentives to delay management reform and production organization reform,reduce new equipment procurement,intellectual property procurement,R & D expenditure and innovation activities,so as to enjoy the financial benefits of income tax concessions and not accept incentives on tax policy.Then corporate competitiveness may be reduced or barely maintained as it is.In view of this,this paper focuses on whether the incentives policies of the income tax can motivate the enterprises to maintain or even improve the level of enterprise productivity,technological level and innovation level during the period of enjoying the income tax benefit,that is,to study the incentive effect of the income tax incentives policies on the competitiveness of enterprises.The results of this study will be related to the evaluation of the income tax incentives policies,and will also be used to provide research reference or support to the formulation and implementation of policies related to supply side reform.itmay be an inspiration of the follow-up tax and supply-related issues or similar research,but also help accumulate evidence and make a marginal contribution.Supply side reform will stimulate the enterprise self-innovation,and continuously enhance the competitiveness.The competitiveness of enterprises includes the ability of integration,core technology and core products,etc.(Zou Chao,Wang Xinliang,2011).Enterprises can achieve great development depend on their competitiveness.In the competition of contemporary enterprises,the most direct enterprise competitiveness is reflected in the level of enterprise science and technology and the level of innovation,and then the enterprise resource allocation and organization and management,combined to promote a higher level of productivity.Therefore,to a large extent,to improve the competitiveness of enterprises can be summarized to improve the level of science and technology,innovation and productivity levels.And the reason why income tax incentives was chosen to be studied in many taxes are as follows.Firstly,because compared to other taxes,income tax incentives was implemented the most extensive,and most widely used for a longer time(Sun Ying,2015;Huang Cui et al.,2011).Secondly,because of limitation of the data availability,only the income tax is relatively systematic statistics,whose data structure is better and more complete,and other taxes data is rare or not available.Thirdly,as a direct tax,the corporate income tax burden is not easy to pass on,which makes it become the one of the main policy instruments that the government uses to promote economic development;Fourthly,because most of the income tax incentives are meant for small micro-enterprises and high-tech enterprises.Its main purpose is to reduce business costs,encouraging enterprises to carry out scientific and technological activities,which is in line with the spirit of supply side reform so much.Under the framework of this article,the main incentive mechanism of income tax incentives policies is: before the enterprises enjoy the income tax concessions,income tax incentives encourage enterprises to actively carry out scientific and technological activities,enterprises will be identified as high-tech enterprises and enjoy the income tax concessions after which strive to meet the standard,which is a pre-incentive.The financial benefits of tax incentives motivate companies to continue to maintain higher(or improve a higher)levels of technology and innovation(and indirectly encourage firms to maintain higher or even improve a higher productivity levels)for the next three years,thus,the previous high-tech enterprise can again being identified as high-tech enterprises,and then once again enjoy the income tax incentives,which is a post-incentive.Of course,the financial benefits of income tax incentives can release the economic resources of enterprises,but also provide possibility for the enterprises to invest resources to improve the level of productivity,research,development and innovation.The study is about the influence of income tax incentives on the competitiveness during beneficial time,that is,the incentive role afterwards.The main innovations of this paper are four points.Firstly,this paper has constructed the enterprise endogenous innovation model,providing the mathematical analysis framework of the relationship between income tax incentives and enterprise competitiveness,and enriching the theoretical basis of such problems.Secondly,from the three aspects of productivity level,technological level and innovation level,the relationship between income tax incentives and enterprise competitiveness is comparatively comprehensively evaluated.The connotation of the explanatory variable is much more abundant,and the relevant research is mainly focused on the innovation level(i.e.R & D and patents),the more comprehensive research object in this paper is related to the current supply-side reform and corporate deleveraging background.Thirdly,this paper referred to the World Bank's World Development Indicators(WDI)Science and technology special indicators,according to the data availability,it was the first attempt to define the intellectual property by the variable from the perspective of intangible assets to describe and measure the level of science and technology in enterprises,which may be an inspiration related to the research of the scientific and technological level of enterprises.Fourthly,based on the data in this paper,an empirical study provided a logical chain about why the coefficient of income tax incentives on the total factor productivity is not significant,and this paper speculated some shortcomings of current income tax preferential policies in the implementation.The above-mentioned potential innovation points may enrich the evidence of related research in the empirical research,may be instructive to the follow-up study in the measurement and characterization of the enterprise's scientific and technological level,and give an to the question of the relationshipbetween the income tax incentives and the total factor productivity with evidence,thus to develop the existing literature and make a potential marginal contribution.The overall text is divided into eight chapters.The first chapter is the introduction,mainly elaborates the background of this topic,the practical significance of the topic,the definition of key concepts,the introduction of this paper,the overview of research methods and technical road map,and the innovation and shortcomings of this paper.The second chapter is the literature review,combing the literature on tax incentives and enterprise science and technology development of the recent years,mainly from the positive,negative and no significant impact of tax incentives on the R & D,heterogeneity research,research methods,and finally made a brief review of the literature,and the potential innovation of this article were described.The third chapter is the theoretical model of the two countries Grossman and Helpman(1991).According to the reality of China,the enterprise endogenous innovation model is constructed,and the relationship between income tax incentives and enterprise competitiveness is analyzed theoretically.The results of the theoretical model show that only when the actual income tax incentives level exceeds the corresponding threshold,the traditional enterprises will choose to use the government's tax incentives policies to carry out transformation and upgrading,but the high taxes,resource mismatch and the reality of the tax friction may raise this threshold.The fourth chapter is the empirical research.The empirical research model,sample selection,variable selection and data source are described in this paper.Based on the research design,the market index and the ratio of income tax incentives in industries are used as instrument variables of income tax incentives to minimize the impact endogenous effects.The results show that income tax incentives and total factor productivity(productivity level)are not significantly negative related,but income tax incentives was significantly positively correlated with intellectual property(technology level),R & D expenditure and new patents(innovation level).The fifth chapter is the robustness test,mainly exclude the endogenous and the sample selection bias from four aspects of the model setting,the econometrics method(treated effect model and the Markov match),the proxy variable and the data adjustment,to re-test the impacts of the income tax incentives to the enterprise competitiveness.The results of the robustness test show that the income tax incentives is not significantly negatively correlated with the total factor productivity(productivity level),and is positively correlated with intellectual property(science and technology level),R & D expenditure and new patents(innovation level).The results are consistent.Chapter six is the test of some questionable questions,mainly about "whether the income tax incentives should be level value as an explanatory variable","whether the first-order lag of competitiveness should be add as explanatory variables" and "whether the income tax incentives encourage enterprises to improve competitiveness ".All the three questions were empirically tested and analyzed.In the seventh chapter,the results of empirical study and robustness test were further analyzed.The relationship between total factor productivity and other explanatory variables,the resource mismatch and the enterprise heterogeneity can be explanations of the result from empirical study and robustness test.The further empirical results show that,the total factor productivity is not significantly related to other explanatory variables.The paper speculated that,this is because of low quality of intellectual property and patents,and low level of R & D investment.Chapter eight is the conclusion and prospect of this paper.The main contents are research conclusion,research prospect and policy suggestion.Finally,for inspection purposes,this article also provides an appendix.The display is the summary of the results in a complete tables form.