Impact Of VAT Rate Reduction On The Value Of Pharmaceutical Manufacturing Companies

The pharmaceutical manufacturing industry is closely related to the national health,from maintaining national health,fighting against the epidemic and ensuring social development to forming a national competitive advantage and occupying the highland of innovative technological revolution,the importance of the pharmaceutical manufacturing industry is reflected in all aspects.The Nineteenth National Congress of the Communist Party of China proposed to fully implement the “Healthy China Plan”,pointing out that people’s health should be placed in a strategic position of priority development,which embodies the important position of people’s health in the work of the party and the government,the development of pharmaceutical manufacturing industry conforms to the national strategy.China’s value-added tax reform also actively responds to the call of the country,in recent years,China’s deepening of the VAT reform has continued to advance,and the VAT rate has been simplified and reduced several times.On 20 March 2019,the Ministry of Finance,the State Administration of Taxation and the General Administration of Customs jointly promulgated the Announcement on Deepening the Policies Related to the Vat Reform,which pointed out that if the VAT rate was originally applied to 16%,the tax rate would adjusted to13%,and if the VAT rate was originally applied to 10%,the tax rate would adjusted to 9%.What effect does the VAT rate reduction policy have on the pharmaceutical manufacturing industry? How does it affect corporate value? Who will enjoy more policy dividends in the process? Based on these doubts,this thesis studies the impact of the VAT rate reduction policy on the value of pharmaceutical manufacturing companies from the perspective of the market.This thesis uses the literature research to sort out the research results of domestic and foreign scholars on taxation and enterprise value,conducts research reviews,explains the concepts of VAT and corporate value,expounds tax neutrality and tax shifting,analyzes the impact path of the VAT rate reduction on the value of pharmaceutical manufacturing enterprises.On the basis of literature research,this thesis uses the event study to study the impact mechanism of the VAT rate reduction policy in March 2019 on the stock price fluctuations of A-share listed pharmaceutical manufacturing enterprises,using the cumulative average abnormal return generated by the stock market before and after the policy to measure changes in corporate value during this period,use the reaction of the capital market to assess the policy effect of the VAT rate reduction,analyze the differences of policy impact on various sub-sectors of the pharmaceutical manufacturing industry and the heterogeneity of companies with different tax shifting capacity and with different property rights.The main conclusions are as follows: the VAT rate reduction policy has positive impact on the value of listed pharmaceutical manufacturing enterprises,the VAT rate reduction will help to enhance their corporate value,and the positive impact of the policy on the value of traditional Chinese medicine,biological and chemical pharmaceutical enterprises is more significant,while the policy effect on the value of medical device enterprises is weakest.Comparing with others,the state-owned pharmaceutical manufacturing enterprises and pharmaceutical manufacturing enterprises with strong tax shifting ability are more significantly affected by the VAT rate reduction policy.In view of the above conclusions,this thesis makes suggestions from two different angles of the government and enterprises,including optimizing the VAT rate structure,further simplifying and reducing the tax rate,taking attention to the traditional Chinese medicine industry and enterprises with weak market positions,considering the heterogeneity of enterprises to improve the preferential VAT policies in a targeted manner and making VAT policy promote adjustment of the industrial structure of the pharmaceutical manufacturing industry efficiently;enterprises should also make effective responses,pay attention to their tax shifting ability,rationally use tax planning,and take effective measures to prevent tax risks.This thesis has two main innovation points.One of innovation points is that in the selection of topics,the existing domestic literature in the examination of the impact of VAT on enterprises,are mainly around the "VAT transition" and "replacing business tax with VAT",this thesis focuses on the impact of VAT rate reduction on corporate value,which may be supplemented to a certain extent.And this thesis focuses on the pharmaceutical manufacturing industry,making the research more specific.Secondly,a lot of literature uses corporate financial indicators to measure corporate value now and uses companys’ annual report data to study the effects of tax policy,which may cause time lag,this thesis adopts the event study,using the short-term reaction of the stock market to assess the effect of the VAT rate reduction policy,which can be more time-effective.