The Impact Of Income Tax Preference On The Financing Of SMEs

The COVID-19 that broke out in 2020 and the rise of anti-globalization forces in recent years,the rise of international unilateralism and protectionism,the gradual trend of international win-win cooperation to zero sum game,and the recovery of the international economy after the epidemic is difficult.In order to fully leverage the advantages of China’s market scale and maximize the potential for domestic demand,the Chinese government has put forward a "dual circulation" strategy with a broad perspective.Small and medium-sized enterprises,which occupy a quantitative advantage in the market,play an important role in promoting national economy and social stability.However,due to the small scale and limited cash flow of small and medium-sized enterprises,their internal retained earnings cannot meet their funding needs.Additionally,due to their inherent characteristics such as generally short lifespan,fewer collateral,and poor risk resistance,as well as external environmental factors,these enterprises face strong financing constraints.Therefore,small and medium-sized enterprises are at a disadvantage in market competition.Especially the repeated epidemic has dealt a fatal blow to small and medium-sized enterprises,with a large number of enterprises closing down and unemployment rates rising.In order to help SMEs overcome difficulties,enhance market confidence,promote domestic economic recovery,alleviate employment pressure,further tap the potential of SMEs,and promote high-quality economic development in China to form a long-term mechanism,our government needs to make comprehensive efforts in finance,finance,law and other aspects.Under the premise of ensuring the normal operation of the market,appropriate policy intervention is beneficial for small and medium-sized enterprises to improve their market competitiveness and fully play their role in maintaining growth and stabilizing employment.Among them,tax policy is one of the important means for the government to intervene in the market.Through tax policies,the government can reduce the tax burden on enterprises,reduce their costs,increase their available funds,and improve their profitability and debt repayment ability.In addition,tax policies can also guide the flow of social capital to small and medium-sized enterprises.Therefore,it is necessary to study the effects of tax policies on the financing of small and medium-sized enterprises and propose relevant countermeasures and suggestions.This provides a reference basis for the government to formulate policies for small and medium-sized enterprises in the next stage,promote the healthy development of enterprises,and fully play its important role in increasing employment opportunities,promoting economic growth,technological innovation,and social harmony and stability.Based on this background,this article adopts literature review,theoretical analysis,and empirical analysis methods,using data from non-financial industries on the SME board and the Chi Next board from 2011 to 2021,and screening according to the classification criteria for small and medium-sized enterprises,to study the mechanism and impact of income tax incentives on the financing of small and medium-sized enterprises.Firstly,review and summarize the existing relevant literature both domestically and internationally.Secondly,through theoretical analysis of the mechanism by which income tax incentives affect the financing of small and mediumsized enterprises,the research hypothesis of this article is proposed.Finally,this paper uses stata16 statistical software to establish a least squares model and a fixed effect model to empirically test the research hypothesis,and tests the robustness of the empirical results by changing explanatory variables,eliminating foreign enterprises,and instrumental variables.At the same time,this paper tests the heterogeneity of the industry,property rights,and life cycle of the benchmark regression.According to the theoretical and empirical analysis,this paper draws the following conclusions:(1)Income tax incentives can significantly promote the financing of SMEs,that is,debt Financing and equity financing.(2)The impact mechanism analysis found that the greater the degree of information asymmetry between SMEs and external investors,the more significant the promotion of income tax incentives on SMEs’ debt Financing and equity financing.In addition,the impact of the epidemic will also enhance the role of income tax incentives in promoting SMEs’ debt Financing and equity financing.(3)Heterogeneity analysis shows that income tax preference has a more significant role in promoting debt Financing and equity financing of manufacturing SMEs.The income tax preference plays a more significant role in promoting the debt Financing and equity financing of non-state-owned SMEs.The income tax preference has a significant role in promoting the equity financing of SMEs in the growth period,and has a more significant role in promoting the debt Financing of SMEs in the mature and recession periods.Based on the research conclusions and the actual situation,the following countermeasures and suggestions are proposed: Firstly,improve the tax policies for small and medium-sized enterprises.Reduce the income tax rate for small and mediumsized enterprises;Adjusting the accelerated depreciation policy for fixed assets of small and medium-sized enterprises;Appropriate extension of tax incentives for epidemic prevention and control;Adjusting the preferential policies for investors such as financial institutions to invest in small and medium-sized enterprises;Adjust tax preferential policies for small and medium-sized enterprises in different industries,property rights,and development stages.Secondly,improve government related supporting work.We should further improve the tax system and implement tax and fee reduction policies;Both legal and financial support systems should be taken into account to guide small and medium-sized enterprises to improve their financing capabilities;Improve tax efficiency and provide more tax options for small and medium-sized enterprises;Promote information symmetry and promote the "Internet plus" fiscal reform.Thirdly,improve the relevant systems for small and medium-sized enterprises.We should fully recognize our own shortcomings,improve internal management and financial systems of enterprises,not blindly follow the trend of investment,and focus on the present and the future.We should fully utilize tax policies,carry out research and development innovation activities,enhance market competitiveness,in order to attract more investors and achieve sustainable development of enterprises.