The Incentive Effect Of The Refund Of Term-end Excess Input Value-added Tax Credits On Corporate Investment

China’s economic development is under the triple pressure of demand contraction,supply shock and expected weakening,and is under downward pressure.To reduce enterprise costs,solve the mismatch between product supply and demand,and smooth the market operation mechanism,it is necessary to promote the supplyside structural reform.Before the reform of Uncredited VAT Refund,China implemented a system of non-refundable VAT retention credits.However,it was incompatible with the current economic development of China,and the large amount of retained tax credits took up enterprises’ cash flow,increased their tax burden and discouraged their investment.In 2022,it was proposed for the first time to implement a larger and stronger combined tax and fee support policy on the basis of tax reduction and fee reduction,and the first large-scale refund of the stock of the tax retain of the VAT,which amounted to 2.46 trillion yuan for the whole year.It is of great practical significance to study whether the tax credit refund can effectively stimulate corporate investment.To test the research hypothesis of this paper,this paper attempts to evaluate the impact and mechanism of action of the refund of term-end excess input value-added tax credits policy on enterprise investment activities by using a Difference-inDifference(DID)model based on the data of listed companies in a natural experiment based on Fiscal and Tax [2018] No.70.After the model benchmark regression,impact mechanism analysis and heterogeneity analysis,the following conclusions are drawn: first,the pilot enterprises significantly increase enterprise investment after the enactment of the refund of term-end excess input value-added tax credits,and there is an incentive effect of the refund of term-end excess input value-added tax credits on enterprise investment.Second,improving net cash flow from enterprises’ operating activities is an important mechanism for VAT tax credit refunds to stimulate enterprises’ investment.Third,the policy incentive effect is more significant for non-state owned enterprises,small-scale enterprises,enterprises in the eastern region,enterprises in highly competitive industries and enterprises with severe financing constraints.Based on the above research,this paper puts forward policy recommendations to establish a normalized system of the refund of term-end excess input value-added tax credits,improve the efficiency of tax refunds,strengthen the risk management of the refund of term-end excess input value-added tax credits and ease the financing constraints of private enterprises and SMEs,with a view to providing some reference for the subsequent improvement of the VAT system in China.