The Impact Of Replacing Business Tax With VAT On Corporate Capital Structure

Since the financial crisis,China's leverage ratio has risen sharply,with the leverage ratio in real estate,transportation and other industries rising at a high level.The solvency of listed companies is worrying,and the debt problem of the enterprise sector is particularly serious(Tan Xiaofen,2016).Appropriate leverage ratio can optimize the allocation of resources,but high leverage will affect the business stability of enterprises,bringing a series of problems to enterprises or even leading to a large number of zombie enterprises.Therefore,"deleveraging" has become one of the main tasks of China's supply-side structural reform.Shen Guangjun(2018)pointed out that although "deleveraging" is an urgent economic problem to be solved in China,the problem of high leverage in China has structural differences in many aspects.These structural differences between different areas,between industry and the state-owned enterprises and non-state-owned enterprises,high leverage structural differences determines the "deleveraging" also need structural policies in our country.Since the "structural tax reduction" was first proposed at the central economic work conference in 2008,There is a growing body of theoretical research on the relationship between structural tax cuts and deleveraging.Existing literature(Shen Guangjun,2018;Yao Yutao,2019;Zhang Chunhai,2019)makes a preliminary exploration on the relationship between the two VAT reforms and the capital structure of enterprises,but all have certain limitations.Shen Guangjun(2018)studied the impact of VAT transformation reform on the asset-liability ratio of enterprises,but the VAT transformation lags far behind the VAT reform process.Yao Yutao studied the impact of "replacing business tax with VAT" on corporate debt from the perspective of "non-debt tax shield" and "tax depletion state" from the perspective of "replacing business tax with VAT",but lacked theoretical analysis of channel mechanism.Zhang Chunhai's latest research used the industrial enterprise database to study the impact of replacing the business tax with a value-added tax(VAT)on the capital structure of enterprises,but only carried out the research on a certain phase of the pilot,which could not reflect the policy effect of phased implementation of the "replacing the business tax with a VAT".This paper uses 2010-2016 panel data of Chinese listed companies,and uses a DID method to delve into the "6 + 1" industry VAT pilot's influence on enterprise capital structure by conducting a series of recognition robustness inspection,heterogeneity and channel mechanism.It is a useful complement to existing literature and provides a new basis to increase the effect of the VAT reform.This paper first theoretically discusses the impact of "replacing business tax with VAT" on the capital structure of enterprises,and analyzes the heterogeneity of enterprise size,enterprise nature and degree of financing constraint.Based on this,six theoretical hypotheses are proposed.Hypothesis 1: H1a: "Replacing the business tax with a value-added tax" can reduce the asset-liability ratio of enterprises byincreasing the "non-debt tax shield".H1b: "Replacing the business tax with a value-added tax" cannot affect the asset-liability ratio of enterprises by increasing the "non-debt tax shield".Hypothesis 2: "Replacing the business tax with a value-added tax" increases the cash flow of enterprises,thus reducing the asset-liability ratio of enterprises.Hypothesis 3: "Replacing the business tax with a value-added tax" has different impacts on long-term liabilities and short-term liabilities.The pilot program of replacing business tax with VAT has not reduced the short-term debt ratio of enterprises,but has reduced the long-term debt ratio of enterprises.Hypothesis 4: the effect of replacing business tax with VAT on capital structure varies among enterprises of different sizes.Compared with large enterprises,"replacing the business tax with a value-added tax" has a greater impact on the capital structure of small and medium-sized enterprises.Hypothesis 5: "replacing business tax with VAT" has different effects on capital structure among enterprises of different natures.Compared with state-owned enterprises,The asset-liability ratio of non-state-owned enterprises decreased significantly after "replacing the business tax with a value-added tax".Hypothesis 6: the effect of "replacing business tax with VAT" on capital structure varies among enterprises with different financing constraints.To be specific,the higher the degree of financing constraints,the more obvious the decline in the asset-liability ratio of enterprises.In the empirical part,this article uses the 2010-2016 quarter panel data of Chinese listed companies,based on the phased in 2012-2013 "camp to add" natural experiment,using multiple sets of multiple phase double difference model,who in the pilot area as the experimental group,other areas for the control group,the theoretical hypothesis,from the cash flow and non-debt tax shields two mechanism is used to identify the channels,and to analyze a series of robustness and heterogeneity.The study finds that: first,on the basis of controlling other variables that may affect the capital structure,"replacing the business tax with a value-added tax" significantly reduces the asset-liability ratio of enterprises.Second,the "replacing the business tax with a value-added tax" significantly increased the current debt ratio of enterprises,but reduced the long-term debt ratio of enterprises.Third,"replacing the business tax with a value-added tax" does not have a significant impact on the asset-liability ratio of large enterprises,while it has a significant negative effect on the asset-liability ratio of small and medium-sized enterprises.Fourth,the "replacing the business tax with a value-added tax" policy has significantly reduced the asset-liability ratio of non-state-owned enterprises,but has no significant impact on SOEs.Fifth,compared with enterprises with small financing constraints,"replacing the business tax with a value-added tax" reduces the asset-liability ratio of enterprises with high financing constraints.Sixth,cash flow is an important(secondary)channel for "replacing business tax with VAT" to affect corporate capital structure,while "non-debt tax shield" is not.The policy implications of the above conclusions are: first,vigorously promote structural tax cuts.Second,the relationship between "replacing business tax with VAT" and capital structure is heterogeneous among different enterprises.Therefore,In the formulation of tax policies,we should give more tax preference to small and medium-sized enterprises,non-state-owned enterprises and enterprises with difficulty infinancing,which is not only conducive to the realization of tax fairness,but also the core and key of structural tax reduction.Third,enterprises should pay more attention to the "non-debt tax shield".When making financial financing decisions,observing tax indicators and reasonably and legally saving taxes,enterprise executives should not only pay attention to traditional "non-debt tax shield" such as depreciation,amortization and fixed asset investment,but also pay more attention to new forms of "non-debt tax shield" such as R&D investment and human capital.