Working Paper: CEPR ID: DP12786
Authors: Haichao Fan; Yu Liu; Nancy Qian; Jaya Wen
Abstract: This paper uses a balanced panel of large manufacturing firms to study the dynamic effects of computerizing VAT invoices on tax revenues and firm behavior in China, 1998-2007. We find that computerization explains 10.8% of cumulative VAT revenues and increases the effective average tax rate by approximately 9-12% in the seven subsequent years. The evidence suggests that the effects of computerization change over time: tax revenue gains are likely to be smaller in the long run. Meanwhile, firms reduce output and input, and increase productivity monotonically over time.
Keywords: Taxation; State Capacity; Technology; Economic Development; Firm Growth
JEL Codes: H25; H26; O12
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| computerization of VAT invoices (H25) | tax revenues (H29) |
| computerization of VAT invoices (H25) | effective average tax rate (H26) |
| computerization of VAT invoices (H25) | firm behavior (D21) |
| increase in VAT enforcement capabilities (H26) | increase in VAT revenues (H25) |
| increase in VAT revenues (H25) | increase in effective average tax rate (H26) |
| computerization of VAT invoices (H25) | productivity (O49) |