Journal of Tax Reform
Tax-Cut Policies, Accounting Conservatism, and Corporate Tax Burden Stickiness: Empirical Analysis from China
Feilei Li 1, 2, Luhua Xie 3, Yexiang Ruan 4
1 Philippines University, Manila, Philippines
2 Nanchang Institute of Technology, Nanchang, China
3 Fujian Agriculture and Forestry University, Fuzhou, China
4 Fujian Business College, Fuzhou, China
Abstract
This study explores the relationship between tax-cut policy, accounting conservatism, and corporate tax burden stickiness in Chinese listed companies from 2008 to 2019. The primary objective is to identify the underlying reasons for continued high levels of corporate tax burdens despite the introduction of tax-cut policies. An econometric model was developed to analyze the transmission mechanism of these policies affecting corporate tax burden stickiness to achieve this goal. The tax burden stickiness refers to the mismatch between the objective and subjective tax burdens. Results reveal four primary findings: Firstly, macro tax-cut policies induced micro-enterprises to soften their accounting conservatism, leading to increased corporate tax burden stickiness. Secondly, the reduced quality of corporate accounting reports, influenced by tax-cut policies, contributes to corporate income tax burden stickiness. In contrast, the VAT tax burden remains unaffected. Thirdly, compared to state-owned enterprises, private enterprises responded more sensitively to tax reduction policies by significantly decreasing their accounting conservatism level and increasing corporate tax burden stickiness. Finally, high-tech manufacturing enterprises recorded the highest increase in corporate tax burden stickiness, suggesting that different robust accounting policies exist across various industries and may be critical factors determining corporate tax burden stickiness. In practical terms, this study provides important insights into improving businesses’ understanding of tax burden patterns, enabling improved resource allocation of taxes accordingly. Additionally, it focuses on enhancing accounting conservatism to alleviate the pain of high tax burdens on such businesses. Ultimately, minimizing the stickiness of tax burdens will allow fiscal and taxation policies to better flex their regulatory muscles toward achieving effective and stable economic growth.
Keywords
tax burden stickiness; tax-cut policy; corporate tax burden; accounting conservatism
JEL classification
Н20, Н21, Н26References
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Acknowledgements
We sincerely thank the anonymous reviewers who provided invaluable feedback and constructive criticism of our paper. Your insightful comments and suggestions have contributed significantly to improving this work, and we are truly grateful for your time and effort in reviewing my manuscript. In addition, we would like to thank the editorial team of the Journal of Tax Reform for their patient guidance and meticulous support throughout the process. Finally, we would like to acknowledge the support of our colleagues, whose contributions have been vital to completing this research.
About Authors
Feilei L i– Ph.D., lecturer, the Lyceum of the Philippines University (Manila, Metro Manila, 1000, Philippines), the Legal Affairs Department of Nanchang Institute of Technology (No. 901 Hero Avenue, Qingshanhu District, Nanchang City, Jiangxi Province, China). ORCID: https://orcid.org/0009-0003-8273-3629, e-mail: 363654276@qq.com
Luhua Xie – Ph.D., Lecturer, the Accounting Department of Fujian Agriculture and Forestry University (No. 15 Shangxia Shop Road, Cangshan District, Fuzhou City, Fujian Province, China, 350002). ORCID: https://orcid.org/0009-0002-8044-8544, e-mail: xieluhua2022@126.com
Yexiang Ruan – Student, the Overseas Education College of Fujian Business College (No. 8 Tingjiang Road, Tingjiang Town, Mawei District, Fuzhou City, Fujian Province, China). ORCID: https://orcid.org/0009-0000-8036-977X; e-mail: 3127209517@qq.com
For citation
Li F., Xie L., Ruan Y. Tax-Cut Policies, Accounting Conservatism, and Corporate Tax Burden Stickiness: Empirical Analysis from China. Journal of Tax Reform. 2023;9(2):197–216. doi.org/10.15826/jtr.2023.9.2.137
Article info
Received April 17, 2023; Revised May 24, 2023; Accepted June 27, 2023
DOI: https://doi.org/10.15826/jtr.2023.9.2.137
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